Published on Dec 14, 2015

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Christmas is the season for giving, but most of us probably don’t want to extend our generous spirit to the Australian Tax Office.

As businesses look to wrap up 2015 some might be thinking about having a staff Christmas party or handing out gifts to employees – both activities that have the potential to attract Fringe Benefits Tax (FBT).

Robert Ryan from Cessnock’s Ryan Accounting, Taxation & Business Services helps shed some light on FBT and shares a few tips on how to reward staff without attracting the attention of the tax man.

Make the benefit minor – in value, not in sentiment!  
Minor benefits will not incur FBT and are generally categorised as having a notional taxable value of less than $300 inclusive of GST, must be provided on an infrequent or irregular basis and not as a reward for services.

The payment of cash is never considered as a minor benefit and would be subject to normal PAYG withholding.

When it comes to the Christmas party plus-ones are okay, but location counts.
A Christmas party held at the employer’s business premises on a working day where food and drink— including alcohol—is provided is usually FBT free, treated for tax purposes the same as the occasional Friday drinks at work.

The cost associated with Christmas parties held off business premises—such as food, drink and transport to the restaurant—will give rise to FBT unless the minor benefit rules apply.  Essentially, you can have a Christmas party off-premises if the total cost per person does not exceed $300.

Associates of employees who attend Christmas parties are treated the same as employees and the minor benefit rules would apply to determine the extent of any FBT.

Note that other benefits provided at a Christmas party for employees such as gifts may be considered a separate minor benefit in addition to meals provided.  In such cases, the threshold is applied to each benefit provided and you could have catering costs up to $300 and also a gift up to $300 per employee.

Employee reward and recognition is important
Employee rewards come in different forms.  Whilst end of year recognition usually involves a financial component, that doesn’t have to be the case throughout the rest of the year.

Research has shown thoughtful and authentic acknowledgement of employee work and effort creates a measurable increase in employee satisfaction which correlates with a direct increase in customer satisfaction.  Happy employees make for happy customers!

A good way to acknowledge a job well done is to:

•    Thank the person by name.
•    State specifically the act or work you are acknowledging.  It is important to be specific because it identifies and reinforces work expectations.
•    Explain how the behaviour made you feel – pride as a manager or owner, respectful of the quality of work or outcome.
•    Point out the value added to the team or organisation.
•    Thank the person again by name for their contribution.

For more information about tax, including Fringe Benefit Tax, contact Ryan Accounting or visit the ATO website.  To find out more about motivating staff, visit the NSW Government Industrial Relations website.

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