Where entertainment expenses are incurred in providing a fringe benefit to an employee or associate, the entertainment expense will generally be income tax deductible as an ordinary business expense, but may be subject to fringe benefits tax (FBT).
There is an exemption available within the Fringe Benefits Tax Assessment Act in respect to “Minor Benefits” – these are defined as benefits with a value of less than $300 and are “infrequent and irregular”. Generally speaking, a gift for an employee upon the birth of a child, or a milestone birthday, with a value of less than $300 would be considered to be a “minor benefit”.
Whilst minor benefits are exempt from Fringe Benefits Tax, they are not tax deductible, and the input tax credit (GST) cannot be claimed.
FBT legislation was introduced in 1986, but still proves to be confusing to many business owners. If you need assistance, please call us at Sothertons on 4972 1300 and we will help you minimise the “mess” the tax man leaves behind after your Christmas Party!