| FBT and Minor Benefits |
| Minor benefits are exempt from FBT if provided infrequently and irregularly, and the value is less than $100.
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It is important there is no pattern or regularity, and that the number is small; eg. gifts of less than $100 to employees at Christmas and on birthdays are exempt. Christmas parties for employees may also be exempt as a minor benefit.
However, the minor benefit exemption only applies to benefits and gifts to employees. As a result, where a minor benefit is given to both an employee and a family member, the value of the gifts must be added together to determine whether the total value is below $100. The exemption is lost if the value is $100 or more.
The ATO accepts that where an employer provides incidental recreation entertainment expenditure by way of a band and/or other entertainers which have been separately engaged as part of a function, such as a Christmas party, that will be an exempt benefit where the total cost of all associated benefits does not exceed $125.
This means that the incidental recreation entertainment is an exempt minor benefit and is not a reportable fringe benefit (note that the tests as to frequency and regularity of identical or similar benefits being supplied still apply).
Example
An employer puts on a Christmas function at a hotel restaurant with only employees attending. Food and drink are supplied at $95 per employee. The employer separately engages a comedian at an effective cost per employee of $20. Because the comedian has been separately engaged and is only incidental to the meal etc., and does not cost more than $125 per employee, the comedian costs would also be treated as a minor benefit.
However, if the employees were taken to a theatre restaurant where the cost was $120 per head, the minor benefit rules would not be accepted as applying because the non-meal entertainment is not separately arranged and is not incidental to the provision of food.
Example
An employee and his family are given a Christmas hamper to the value of $90.
This is the only gift given during the year.
The gift is a minor benefit and because the hamper is not considered to be the provision of entertainment, the cost is both tax deductible and exempt from FBT.
Example
An employer gives each employee a Christmas gift of a hamper worth $80, which also includes a $50 gift voucher for the family. The total value of the gift exceeds $99, so the minor benefit exemption does not apply.
Both gifts are subject to FBT, but the employer can claimed a tax deduction for the cost of the benefit and any FBT paid.
Example
Each employee is given a bottle of Scotch or a perfume valued at $80 as a Christmas present. It is the only benefit received. Neither the Scotch, nor the perfume is an entertainment expense and is a minor benefit. The cost is therefore deductible to the employer and there is no FBT.
It is possible for multiple gifts to be eligible for the minor benefit exemption but is essential that the gifts be a clearly separate and different nature for instance, the employer could provide a hamper and a Christmas party and both could be exempt from FBT provided the value of each gift is below $100 and the other tests are satisfied.
It may be more tax-effective to provide a Christmas party for the employees only and to provide a hamper for the employee and family. It is recommended that the hamper be provided on a separate occasion. That way, provided the cost of each benefit is below $100, there will be no FBT as they would both qualify as minor benefits.
An employer is not entitled to use the minor benefit exemption if an election has been made to use the 50/50 split method to calculate the FBT liability for meal entertainment benefits.
If the 50/50 method has been chosen, the employer must aggregate ALL meal entertainment expenditure (including minor benefits) regardless of whether or not is subject to FBT. The employer is then entitled to a tax deduction for 50% of that expenditure and FBT is payable on that 50 %.
Employers must be very careful when choosing this method as it may result in higher FBT being payable.
See also our other articles about FBT.
12th-January-2004 |
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