In the next few weeks, many workplaces will be throwing their annual Christmas party for themselves and their employees.  Nothing screams “Party!” quite like Fringe Benefits Tax legislation, so here’s a quick overview of the FBT rules for employers to keep in mind as Party Season hots up.

Employers must pay fringe benefits tax (FBT) – at a rate of 47% – on the grossed-up taxable value of certain non-cash benefits that are supplied to their employees or their associates (including past, future and current employees, and their spouses and children).

However, certain non-cash benefits will not be subject to FBT.  While the FBT law does not specifically deal with Christmas parties, the following types of benefits are exempt from FBT, and are particularly relevant when determining an employer’s FBT liability when hosting a Christmas party:

  • Minor and infrequent benefits valued at less than $300.  This is a catch-all exemption available for current employees and their associates for low-value benefits provided on an “infrequent” or “irregular” basis.
  • Exempt property benefit (e.g. all Christmas party food and drink provided by the employer that is consumed by a current employee at a party, provided the party is held at the employer’s premises on a business day); and
  • Exempt transport benefits (e.g. a current employee’s employer pays for a taxi ride home if the Christmas party is held at the employer’s premises).