Welcome to our December 2023 edition of the StewartBrown newsletter. Below are several important points to note as we close out the calendar year from a tax and business perspective.

Click here to download a PDF copy of the December 2023 StewartBrown newsletter.

STEWARTBROWN – CHRISTMAS CLOSURE

We advise that the StewartBrown offices will be closed during the holiday period as follows:

Office closes from 5.30pm Wednesday, 20 December 2023
Office reopens on Monday, 8 January 2024

The Partners and staff of StewartBrown take this opportunity to wish all our clients and business associates a very merry Christmas and a joyful New Year.

FRINGE BENEFITS TAX AND CHRISTMAS PARTIES

It is that time of year again and we thought a reminder on the tax consequences of Christmas celebrations and gifts would be timely. Income tax, FBT and GST are all relevant considerations where these costs are involved.

Christmas parties

The tax consequences will depend on a number of factors including the following:

• whether the employer is a tax-paying body, tax rebatable or tax exempt
• whether the party is held at your business premises or off-site
• the cost per person
• the fringe benefits tax method used by the employer (actual or 50/50 split method)
• whether or not the minor benefit rule applies where food and drink at the function is less than $300 per head (i.e. the benefit is an “exempt benefit”). (N.B. Where the minor benefit rule applies to entertainment expenditure, the employer will not be entitled to claim a tax deduction or to claim GST input tax credits in respect of the expense).
• who attends the party (clients, employees, associates of employees)

To determine the tax consequences, employers need to identify all function-related costs.

Christmas party held on the employer’s premises

A Christmas party held on the employer’s business premises will be treated as follows for the various attendees:

Employees: exempt from FBT and not deductible for income tax. GST input tax credits cannot be claimed.
Associates of employees: subject to FBT and deductible for income tax. If FBT applies, GST input tax credits can be claimed. However, if the cost of the food and drink is less than $300 per person, the minor benefit exemption can apply. If the exemption applies, no tax deduction will be allowed and GST input tax credits cannot be claimed.
Non-employees/non-associates: not subject to FBT, no tax deduction and GST input tax credits cannot be claimed.

Christmas party held off-site

A Christmas party held at restaurants or similar venues will be treated as follows for the various attendees:

Employees and associates of employees:
The expenditure will be subject to FBT and deductible for income tax. If FBT applies, GST input tax credits can be claimed. However, if the cost of the food and drink is less than $300 per person, the minor benefit exemption can apply. If the exemption applies, no tax deduction will be allowed and GST input tax credits cannot be claimed.
Non-employees/non-associates:
The expenditure will not be subject to FBT, there will be no entitlement to a tax deduction and GST input tax credits cannot be claimed.

Christmas travel and accommodation provided in connection with Christmas parties

The definition of “provision of meal entertainment” includes accommodation or travel in connection with providing entertainment. Travel and accommodation costs incurred in connection with the Christmas party must be included by the employer as part of their meal entertainment expenditure.

Recreation provided at Christmas parties

Recreation expenditure (eg live shows, theatre etc.) must be separated from the meal entertainment expenditure as it may have a different FBT treatment to the meal entertainment expenditure. You need to use the actual method to deal with recreation expenditure, as follows:

Employees and associates of employees:
The expenditure will be subject to FBT and deductible for income tax. If FBT applies, GST input tax credits can be claimed. However, if the cost of the recreation is less than $300 per person, the minor benefit exemption can apply. If the exemption applies, no tax deduction will be allowed and GST input tax credits cannot be claimed.
Non-employees/non-associates:
The expenditure will not be subject to FBT, there will be no entitlement to a tax deduction and GST input tax credits cannot be claimed.

Christmas gifts

Again, the tax treatment will depend on:

• the recipient of the gift
• if the gift is provided at the Christmas party
• whether the gift is in the nature of entertainment
• whether or not the minor benefit rule (less than $300) applies

Gifts provided at the Christmas party to employees

Where a Christmas gift is provided to an employee at the Christmas party, the benefits are associated benefits, but the ATO’s view is that each benefit needs to be considered separately to determine if the benefit is less than $300 in value. If both the Christmas party and the gift are each less than $300 in value and the other conditions of a minor benefit are met, they will both be exempt benefits.

If the gift is in the nature of entertainment (e.g. theatre tickets), whilst the $300 minor benefit rule may apply to exempt the benefit from FBT, as the gift is in the nature of entertainment, the cost of the gift will not be tax deductible and GST input tax credits cannot be claimed.

If the gift is not in the nature of entertainment (e.g. a bottle of perfume or alcohol), the cost of the gift will not be subject to FBT, it will be tax deductible and GST input tax credits can be claimed.

Gifts provided to non-employees/non-associates

Where a Christmas gift is provided to clients or suppliers, and the gift is not in the nature of entertainment (e.g. a bottle of alcohol or perfume), the cost of the gift will be tax deductible. The cost of gifts in the nature of entertainment (e.g. theatre tickets) provided to clients or suppliers will not be tax deductible and GST credits cannot be claimed.

For the information of clients we enclose this checklist which you may find helpful in planning your year-end tax strategies. Careful planning (and in many cases timing) is always important when tax planning is concerned. This document is not exhaustive and your individual circumstances must be considered. Please contact your StewartBrown Manager or Partner should you need any assistance with understanding or applying the below.

Here’s a quick summary of what you need to consider for yourself and your business before the end of the financial year:

On Tuesday, 9 May 2023, Treasurer Jim Chalmers handed down the 2023-24 Federal Budget. As with all Budgets, these are announcements only and have not been legislated. The details are still to be worked through, and both Houses of Parliament need to pass legislation before the announcements take effect.

The Fringe Benefits Tax (“FBT”) year ended on 31 March 2023 and each employer is required to calculate their liability for FBT. Where a liability for FBT exists, an annual return is required to be lodged and any tax paid by 21 May 2023. However, if the return is lodged electronically by a Tax Agent the due date of lodgement and for payment is 25 June 2023.

Where an employee reimburses their employer for the value of a taxable fringe benefit(s) provided to them (thereby reducing the FBT liability to nil) there is no requirement to lodge an annual FBT return. However, we strongly advise lodging a nil return in these instances as this starts the time period in which the ATO can challenge your FBT assessment. Where no FBT annual return is lodged, the ATO have no time limit and can raise an FBT assessment at any time. As with all tax lodgements, appropriate documentary evidence must be maintained. Where FBT reimbursements are paid by the employee to the employer they are subject to GST and 1/11th of these amounts must be disclosed on your business activity statement for the quarter in which the reimbursement is received. We will advise you of any such amounts, where applicable, when we prepare your FBT return.

To assist you in understanding your FBT obligations we enclose the following:

1. An update of the main changes during the year, which you may need to consider when determining your FBT liability.
2. A summary of taxable benefits typically provided to employees, in order to assist you in determining whether you may be providing such benefits to your employees.
3. A summary of the on-going income statement reporting obligations.

We remind you that where motor vehicles are provided to employees or their associates for their private use, odometer readings must be recorded as at 31 March each year for each motor vehicle. We enclose a form which should be used to record this information. Also included is a form for your completion in respect of entertainment expenditure. We require this information in order to assist in the calculation of your FBT liability, if any.

If you have any queries in respect of your potential FBT liability or would like StewartBrown to perform a FBT ‘health check’ on your business, please contact one of the StewartBrown Managers or Partners to discuss.

Click here to download a PDF copy of the Stewartbrown 2023 FBT edition of our client newsletter.