Navigating Fringe Benefits Tax at Christmas

Fringe Benefits Tax (FBT) is a tax that employers pay for non-cash benefits they provide to their employees.  Rather than taxing the employees on these benefits, the employer pays fringe benefits tax.

Christmas provides employers with a great opportunity to reward their staff.  Understanding the key FBT considerations during Christmas time is crucial to avoid potential pitfalls and optimise tax outcomes.

Christmas parties

Hosting a Christmas party is also a great way to celebrate the end of the year.  However, there may FBT implications associated with the party.

The costs associated with Christmas parties (for example, food and drink) are exempt from FBT if they are provided on a working day on your business premises and consumed by current employees. 

Alternatively, if you hold your Christmas party away from your business premises, the party will be exempt if it costs less than $300 per employee.

Christmas presents

Gifts that are given to employees can attract FBT.  However, if the value of the gift is below $300 per employee, it is exempt. 

Tax deductions and GST

You can only claim a tax deduction and GST on benefits that are subject to FBT.  So, if the benefits you are providing to your employees (gifts and/or Christmas party) are under $300 and exempt from FBT, they will not be tax deductible nor can you claim any GST on the cost.

Proposed New Tax for Superannuation Balances over $3 million

On 3 October 2023, the Federal Government released draft legislation proposing a 15% additional tax on earnings for individual superannuation balances that exceed $3 million.  The new measure is set to commence on 1 July 2025.

This proposed new tax will impact on individuals that have a total balance in super or more than $3 million (this is across all superannuation accounts held).

The 15% tax will be levied on the member’s account “earnings” which will be calculated as the movement between the member’s opening and closing balance for the year (after adjusting for withdrawals, contributions and other specific exclusions).  It will only apply to the proportion of an individual’s account balance that is above $3 million (so if your balance is only just over the $3 million threshold, only a small proportion of the earnings will be subject to the new tax).

This means that for individuals who have a total superannuation balance in excess of $3 million, a proportion of unrealised gains of the fund will be taxed at 15%.  This may cause a cash flow concern for the member as they will have to pay tax on gains that have not been realised (and may be held within illiquid assets).

Where there have been negative earnings, the loss can be carried forward to offset future “earnings”.  However, there is no provision in the draft legislation for the losses to be carried back to reduce prior year unrealised gains. 

As yet, there is also no provision for the $3 million threshold to be indexed.

The tax will be levied directly to the individual member (and not the superfund).  The ATO will issue an assessment to the member personally and they can elect to pay the liability personally or withdraw funds from their superfund balance to pay the liability.

We will keep you up to date on the progress of the draft legislation.  Please do not hesitate to contact us if you would like to discuss the impact of the proposals on your superannuation fund.

Small Business Boost Grants Program

Queensland

The Queensland Government have released a new Small Business Grant that opens at 9am on 6 September 2023.

The Grant provides funding between $10,000 and $20,000 for eligible projects.  Applicants must contribute an equal amount to the funding requested under the grant.

The Business Boost grants assist small businesses to enhance their efficiency and productivity.  Specifically, it is aimed at funding 3 project areas:

1. Future planning
2. Specialised and automated software
3. Planning and systems for staff management and development.

For more information about the grant, please refer to the Business Queensland website.

Small Business Lodgement – Penalty Amnesty

As part of the 2023-24 Budget the Federal Government announced a small business lodgement penalty amnesty.  This is a time-limited initiative introduced to provide small business owners with the chance to get their tax obligations up-to-date without incurring any late lodgement penalties.  The amnesty is effective from 1 July 2023 until 31 December 2023.

To be eligible you will need to meet the following criteria:

• You are a small business with an aggregated turnover of less than $10 million at the time the original lodgement was due.
• You have outstanding income tax returns, business activity statements and/or fringe benefits tax returns that were due between 1 December 2019 – 28 February 2022.
• Eligible overdue forms are lodged between 1 June 2023 and 31 December 2023.

If you lodge your outstanding returns as part of the amnesty, any late lodgement penalty will be remitted.

The amnesty doesn’t apply to private owned groups or individuals controlling over $5 million of net wealth.

Please contact us if you have outstanding lodgements and would like assistance in getting these up-to-date.