Fringe Benefits Tax (FBT)

With the celebratory season for many fast approaching it is time to consider taxes, of course! In particular, this time of the year turns our attention to the tax impost on gifts in connection with operating a business.

Infrequent gifts to employees that are not considered entertainment, such as Christmas hampers, wine, gift cards (except for where the voucher is for entertainment), a bottle of perfume, flowers etc., where provided to employees or family members, and the cost is less that $300, are not subject to FBT and a tax deduction is available. Where the cost is $300 or greater, FBT is payable and a tax deduction is allowed.

Where these types of gifts are provided to clients or suppliers then no FBT will apply and a tax deduction is still allowed.

Gifts that are considered entertainment include tickets to attend a theatre, live play, sporting event, holiday airline tickets and such like. In these cases, like all entertainment, when provided to employees or their family members FBT applies. The only exception is when FBT is calculated using the “Actual method” (meaning actual identification for all entertainment expenses), and the amount is less that $300, and it qualifies as a minor and infrequent benefit. If using the “50/50 method” to calculate FBT then 50% of the cost would be subject to FBT, and the amounts not subject to FBT do not qualify for a tax deduction.

Where these types of gifts are provided to clients or suppliers no FBT will apply and no tax deduction is allowed.

It is also worth a reminder that no Goods and Services Tax (GST) tax credit can be claimed on expenses that are not tax deductible.