Is Your End-of-Year Party Liable for Fringe Benefits Tax?

At the end of the year, it is traditional for employees to get together with their bosses to have a special party and look back on the preceding 12 months. If you're a business owner and are doing so for the first time, you may want to put on a great event and go out of your way to treat your employees at this festive time. Yet does this have any implications from a tax perspective, and are you giving something to your workers that the tax authority may see as valuable? What do you need to know?

Tax on Benefits

To be sure that you do not under-declare or run into any problems with the ATO, you need to understand the implications of fringe benefits tax (FBT). This tax is applied to some non-cash benefits you provide to your employees, their family or associates. Those benefits would then be treated as an addition to the salary or wage package. If applicable, you need to account for this tax separately as it is somewhat different from income tax or GST.

What Is FBT? 

FBT may be applied at a hefty rate of 47% on the taxable value of any fringe benefits. So, as you can see, it's important to fully understand what you may be liable for and account correctly.

Usually, FBT is applied to things like personal use of a company car, tickets to a big rugby match, or a gym membership. It can also apply to free or discounted food, which is where your end-of-year party may come into the picture.

Is Tax Payable?

Still, if you schedule and organise carefully, you may not have any taxable liability. For example, you may need to hold the party at your normal business facility on a business day. So long as you only invite current employees, you may not need to pay the tax on the supply of food and drink. However, it is certainly traditional to invite the spouses or partners of your employees to such an event. Further, many people want to get out of the office and go to a more traditional entertainment establishment to hold this type of event.

Get Clear Advice

So, depending on the type of event and exactly who you intend to invite, you may need to account for FBT. If you're unsure, get in touch with a business tax accountant, provide them with the details, and they will give you the best, up-to-date advice.

To learn more, contact a company like Edge Hill Accountancy.