Employers may want to reward their employees with gifts during the holiday season but may be concerned about whether fringe benefit tax (FBT) applies.
As a general rule, minor benefits (such as gifts) are exempt from FBT. To be considered a minor benefit, each individual benefit must have a ‘notional taxable value’ and it must be unreasonable to treat it as a fringe benefit.
To qualify as a minor benefit, the benefit must be valued at less than $300. This does not include benefits provided to associates.
Five different criteria need to be considered when determining whether it would be unreasonable to treat the gift as a minor benefit.
- Regularity and frequency of the benefit: More frequent and regular benefits means more likely to be considered minor;
- Total of the notional taxable values of minor benefit: Greater total of minor benefit (or similar benefits) means less likely to be considered minor;
- Likely total of notional taxable values of other associated benefits: Greater total value of other associated benefits, less like to be considered minor;
- Practical difficulty in determining the notional taxable value of the minor benefit: Difficulty of keeping necessary records considered; and
- Circumstances in which benefit or associated benefit is provided:
Unexpectedness of event and whether it can be considered as being remuneration.
If the above criteria is met, the gift is likely to be classified as a minor benefit, and be exempt from FBT.
Gifts provided by employers as reward during the holiday season which are under $300 will classify as minor benefits and therefore will be exempt from FBT.
If you need any assistance with FBT please contact us and we can help.