Contact: Petros Kosmopoulos
Corporate Affairs & Communications
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With the Spring Racing Carnival in full swing and Christmas just around the corner, employers should start considering the tax effectiveness of their corporate entertainment, warned professional services firm Deloitte.

An increase in the minor fringe benefits threshold to $300 last year means that more corporate entertainment is now being considered exempt from fringe benefits tax (FBT), said Deloitte’s Employment Taxes partner, Frank Klasic.

“It’s important that companies recognise the FBT implications of a corporate function because if they do their homework and plan appropriately they can avoid unforseen tax obligations,” Mr Klasic said.
“Generally, for income tax purposes, a Christmas party or other function will be tax deductible if it’s subject to FBT. They should not be treated any differently to any normal work party or function for FBT purposes as they usually constitute entertainment and, as such, special rules can apply.

“To determine the FBT implications of a function, employers need to consider the income tax status of the employer, where the function is held, who attends, what was provided, how much it costs and how similar functions are treated.”

Mr Klasic suggested that, as a general rule, employers should consider all entertainment subject to FBT unless an FBT exemption applies to the specific circumstances.

“In some cases, a Christmas party for employees that is held on the work premises during a working day can be exempt from FBT. There are exceptions to this rule and employers should always check their own situation,” Mr Klasic said.

“Under the new rules, which have been in effect since 1 April 2007, if employers spend less than $300 per person on a fringe benefit, the whole amount can be exempt from FBT when certain conditions are satisfied.”
Based on a taxation ruling issued by the Australian Taxation Office in December 2007, the $300 limit applies separately to an employee and their associate (e.g. spouse).

Frank Klasic
Tax Partner
Deloitte
Tel: + 61 (0) 3 9208 7514