Christmas is coming and you want to play Santa and thank your staff for being so good this year ! Sorry for being the Grinch but do you know the rules around FBT? Hint: if you ask what’s FBT, then you probably should read further.

FBT stands for Fringe Benefit Tax. Most benefits given to employees other than their salary or wages are fringe benefits.

We’ll focus here on free (gifts, vouchers and prizes), subsidised and discounted goods and services.

Fringe Benefit Tax (FBT) may apply when these benefits are supplied to the employees on top of their salary. It does not apply to cash as cash should be included in the salaries (and subject to PAYE – oh yeah, it is still taxed).

The good news is that there is a general exemption.

The exemption only applies if the following conditions are fulfilled:

1.    Limit per employee:

The total value of the benefit does not exceed the following amounts (including GST)

·        $300 per quarter and

·        $1,200 per annum

AND

2.    Limit per employer

The total value of all such benefits provided to all employees does not exceed

·        $22,500 per annum (including GST)

So basically, if the exemption applies, there can be an advantage from providing employees with such benefits.

But here’s the catch, if the exemption does not apply, FBT is due on the full value of the benefit.

Example 1: if the benefit in one quarter exceeds $300 for one employee (or $1,200per year), FBT is due on the full benefit received by that employee in the quarter (or year).

Example 2: if the annual benefit exceeds $22,500 for the employer, FBT is due on the full amount and not only on the amount above $22,500.

The definition of employees for FBT is also different than the common use. It includes:

·        shareholder-employees

·        associated persons (such as an employee’s spouse or child)

·        past and future earners

Tax are complex matters, asking your accountant for help is advisable. Or contact us at Strategico if you need an accountant with a difference.

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