Fringe Benefit Tax on gifts to employees

As we approach Christmas it is important to be aware of the Fringe Benefit Tax (FBT) rules on gifts to employees. Many employers are aware of their FBT obligations on motor vehicles and discounted goods and services. However, gifts to employees can also be subject to the FBT rules.

Gifts of cash, or vouchers which can be redeemed for cash, are treated as additional remuneration. Other gifts to employees would usually be subject to FBT, and these include gifts of food or drink if the employee can choose when to enjoy them.

Fortunately FBT is not charged on “unclassified fringe benefits” such as these, so long as two exemptions are met.

The first exemption is the ‘general employee exemption’. This means that FBT is not charged so long as the “unclassified fringe benefits” to a single employee do not exceed $300 per quarter.

The second exemption is the ‘maximum employer exemption’ which means that the total “unclassified fringe benefits” to all employees must not exceed $22,500 per year.

To be exempt from the FBT regime, an employer must meet both criteria.

If you exceed either criteria, FBT is payable on the total value of goods and services gifted to employees in the current quarter.

Rewarding staff is a great incentive to help keep them motivated and by utilising the above exemption, you can provide gifts to employees while staying clear of the FBT regime. A win for everyone.

For more advice with your FBT obligations, contact your local BDO adviser.