Staff Benefits – How to correctly apply the Minor Benefit Exemption

As the festive season has ceased, business who were in a giving mood to employees during this time should understand the various FBT exemptions that can help reduce this cost of additional tax.

The minor benefit exemption broadly applies if: the ‘notional taxable value’ of the benefit is under $300; and, having regard to certain criteria such as frequency, regularity, associated benefits and valuation issues, it would be unreasonable to treat the benefit as a fringe benefit.

If the minor benefit exemption applies, no FBT is payable in respect of the benefit provided.

Albeit, It is important to note that:

  • In this case, no tax deduction and no GST input tax credits can be claimed either (for the cost of the benefit, if that benefit constitutes the provision of entertainment). For many businesses, however, avoiding a 47% FBT liability will outweigh the forgone tax deductions and GST credits.
  • The minor benefit exemption can only apply if the ‘Actual Method’ is used. The exemption cannot apply if either the 50/50 split or 12-week register methods are used to value meal entertainment benefits.
  • There is no safe harbor or guidance on the number of times benefits can be provided for the exemption to apply.
  • The $300 threshold is applied per person, per benefit which means that multiple benefits provided to an employee (e.g., a gift voucher and Christmas lunch) are not added together in determining if the $300 is exceeded.
  • If the less than $300 threshold is exceeded (even by $1), the entire cost of the benefit will be subject to FBT.

Need help?  Call Semmens & Co for more information on 03 8320 0320.

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Mark Semmens

Mark is a Chartered Accountant with a wealth of experience in accounting and taxation. Mark is a Member of Chartered Accountants Australia and New Zealand, the Tax Practitioners Board and the National Tax and Accountants Association.

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Daniela Semmens

Daniela Semmens is a Co-Director of Semmens & Co. and joined the company as General Manager in 2017. Daniela is an Affiliate Member of Chartered Accountants Australia and New Zealand and also a Member of the Australian Institute of Project Management.

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