As we approach Christmas it is important to be aware of the Fringe Benefit Tax (FBT) rules on gifts to employees. Rewarding staff is a great way to say thank you for their hard work and by following the FBT exemption rules, you can provide gifts to staff while staying clear of the FBT regime. A win for everyone.
For the purposes of FBT, ‘Gifts’ are categorised as an “unclassified fringe benefit”. Items that are included in this category include:
- gifts and prizes:
- food or drink if the employee can choose when to enjoy them:
- subsidised or discounted goods and services.
Rules on Fringe Benefit Tax on gifts to employees
To stay out of the FBT regime for staff gifts—
- don't provide “unclassified fringe benefits” of more than $300 to a single employee per quarter; and
- total “unclassified fringe benefits” cannot be more than $22,500 to all staff per year.
If you exceed either criteria, FBT is payable on the total value of goods and services provided to employees in the current quarter. These benefits are calculated using the GST-inclusive cost.
Gifts of cash, or vouchers which can be redeemed for cash, are treated as additional remuneration and not included as FBT (you’ll need to include this in the staff PAYE returns instead).
For advice on what your FBT obligations might be, contact your local BDO adviser.
Find out more about tax changes that might affect your business by exploring our insights.