Festive FBT Concerns – A Guide For Business Owners

As the year winds down, many businesses are preparing to celebrate with end-of-year parties, staff gifts, and client events. 

While these celebrations are a great way to recognise your team’s hard work, it’s important to understand the Fringe Benefits Tax (FBT) implications that can arise. 

Getting it wrong can lead to unexpected tax bills – so here’s what you need to know before the festive season kicks off.

When Does FBT Apply to Christmas Parties?

The good news is that not all Christmas party costs are subject to FBT. The tax applies only when a benefit is considered “entertainment” and exceeds certain thresholds or does not fall under available exemptions.

A Christmas party held on the business premises on a working day is usually exempt from FBT for employees. This is because it typically qualifies as a minor benefit or falls under the property benefit exemption.

However, if your party is off-site – for example, at a restaurant or venue – FBT may apply depending in the cost per person, who attends, and whether the minor benefits exemption applies.

The Minor Benefits Exemption

One of the most commonly used exemptions for Christmas events is the minor benefits exemption. Costs under $300 per person, including GST, may be exempt from FBT if the benefit is infrequent and irregular.

This $300 threshold applies to each person individually. So, an off-site Christmas dinner costing $150 per employee and $120 per partner would generally fall under the exemption.

Note: The exemption applies separately to party costs and gifts. This means an employee could receive a party benefit under $300 and a gift under $300, and both may still be exempt.

What About Clients?

FBT does not apply to entertainment provided to clients. However, the cost is typically not tax-deductible, nor can you claim GST credits. So while inviting clients won’t cause FBT issues, you should be aware of the deduction limitations.

FBT on Gifts vs Entertainment

Gifts for employees can be tricky. Items such as gift cards, hampers, wine, or store vouchers may be considered minor benefits if under $300 per person. In that case, they are not subject to FBT, but you also can’t claim a deduction or GST credits.

Entertainment-type gifts – like theatre tickets or holiday vouchers – are more likely to attract FBT unless under the minor benefits threshold.

Best Practices for a Compliant Festive Season

  • Keep detailed records of attendees and costs
  • Check whether each benefit is under the $300 minor benefits limit
  • Separate costs for employees, associates, and clients
  • Consider holding events on business premises to reduce FBT risk
  • Speak to your accountant early if planning gifts or multiple events

With a bit of planning, your business can celebrate the festive season while avoiding FBT surprises – and ensuring everyone enjoys the end-of-year cheer.

Changing Jobs or Juggling Two? Avoid Tax-Time Surprises with the Right Threshold Choice

When you have more than one job or switch employers mid-year, it’s essential to understand how the tax-free threshold works so you don’t get caught by surprise at tax time. 

The tax-free threshold means that if you’re an Australian resident for tax purposes, you can earn up to $18,200 in a year without paying income tax. 

Multiple Jobs

If you’re working for more than one employer (or have income from a government agency or as a sole trader) at the same time, the rule is: you should generally claim the tax-free threshold from only one employer — ideally the one that pays you the most.

If you claim the threshold from more than one employer while your combined income exceeds $18,200, you may not have enough tax withheld during the year and could end up with a tax bill when you lodge your return. 

If your total income across all jobs is going to stay under $18,200, you could claim the tax-free threshold from more than one employer — but this situation is less common. 

Changing Jobs Mid-year

If you leave one job and start another, you can claim the threshold with your new employer even if you claimed it with your previous employer. The key is to complete a new Tax File Number (TFN) declaration for your new employer and decide whether to claim the threshold with them.

Tax Withheld And Your End-Of-Year Result

At the end of the financial year, the ATO adds together all your income from all sources and compares it to the tax already withheld. If you’ve had too much tax withheld, you may get a refund; if too little, you may have a tax bill.

If you realise early in the year that your combined incomes will put you well above the threshold (or you’ve claimed the threshold incorrectly), you can ask your employer(s) to adjust how much tax is withheld. This might be through a PAYG withholding variation.

Tips To Stay On Top Of Things

  • Work out which job is your “main” job (the higher-paying one) and claim the threshold there.
  • For your second (or third) job(s), let those employers know you are not claiming the threshold, so sufficient tax is withheld.
  • Keep track of all your jobs and income during the year, including any casual work or side-hustle under an ABN.
  • If you change jobs, complete the TFN declaration afresh and let the new employer know your status.
  • If you’re unsure or your situation is complex (e.g., multiple income streams, business income, study-loan repayments), consider speaking with a tax professional.

By following these steps, you can help avoid unpleasant surprises when tax time arrives, and you give yourself greater certainty and control of your finances.

Is A Trip With Family Tax Deductible?

Mixing work and leisure can be appealing – especially if you’re travelling for a conference, meeting, or site visit and bringing your family along. 

However, when it comes to claiming expenses on your tax return, the Australian Taxation Office (ATO) takes a close look. Knowing the rules can help you claim what’s legitimate while avoiding costly mistakes.

Work Vs Personal Expenses

The key principle is that you can only claim the portion of expenses that are directly related to your work. Anything purely personal – like your family’s flights, meals, or leisure activities – cannot be claimed.

For example:

  • If you fly interstate for a three-day work conference and stay an extra three days for a holiday, only half of your airfare and accommodation is deductible.
  • If your family comes along, their costs (airfares, meals, tickets, tours) are entirely private and non-deductible.

Common Deductible Expenses

  • Airfares – Only your work-related portion.
  • Accommodation – Deductible for nights linked to work.
  • Conference/meeting fees – Usually fully deductible if directly tied to earning your income.
  • Meals – Deductible only when incurred while away overnight for work.

Record-Keeping Is Key

The ATO requires clear evidence. Keep:

  • Receipts for all expenses.
  • A travel diary outlining work and private activities.
  • Conference schedules, meeting notes, or booking confirmations to substantiate claims.

Taking family along on a work trip doesn’t stop you from claiming legitimate deductions – but it does mean being extra careful. By clearly separating business from personal expenses and keeping thorough records, you can enjoy your time away without worrying about the tax consequences.

ATO Audits: What You Need to Know — And Why Full Disclosure Matters

No one enjoys the idea of an Australian Taxation Office (ATO) audit, but it’s a reality that both individuals and businesses should be prepared for.

The good news is that most audits are triggered for specific reasons — and staying honest and transparent with your accountant can make all the difference if the ATO ever comes knocking.

How Often Does The ATO Conduct Audits?

While not every taxpayer will face an audit, the ATO regularly reviews data and conducts targeted compliance activities across Australia. Thousands of reviews and audits are performed each year, particularly in industries or areas where discrepancies are more common — such as cash-heavy businesses, high-value property transactions, or unusually large deductions.

With data-matching technology improving every year, the ATO now automatically cross-checks information from banks, employers, super funds, and even online platforms like Airbnb and Uber. This means inconsistencies in reported income, deductions, or business activity are far easier to spot than in the past.

Who Might Be Audited?

The ATO uses data analytics to identify potential red flags, such as:

  • Income that doesn’t match third-party data (like employer-reported earnings).
  • Unusually high deductions compared to others in your occupation or industry.
  • Sudden or unexplained changes in business income or expenses.
  • Failure to lodge returns or BAS statements on time.
  • Participation in schemes or arrangements that appear to artificially reduce tax.

Even if your records are accurate, you can still be randomly selected for review — so it pays to keep everything above board.

Why Full Disclosure To Your Accountant Matters

Your accountant’s advice and reporting are only as accurate as the information you provide. If you withhold or misrepresent income, expenses, or assets — even unintentionally — you may face serious consequences if an audit reveals discrepancies.

Importantly, your accountant cannot be held liable for errors or penalties resulting from incomplete or false information supplied by the client. When you disclose openly, you give your accountant the best chance to prepare accurate returns and ensure compliance with tax law — and to protect you in the event of an ATO review.

The real cost of an audit

An audit isn’t just stressful — it can also be costly. Depending on the scope and duration, professional fees, time spent gathering records, and potential penalties can add up quickly. If the ATO finds that you’ve underpaid tax, you could face interest charges, penalties, and repayment obligations stretching back several years.

Some businesses choose to protect themselves with audit insurance, which covers the professional fees incurred during an ATO review or audit. It’s worth discussing whether this option suits your circumstances.

Staying on the safe side

The best way to avoid audit trouble is simple — keep thorough records, stay compliant, and communicate openly with your accountant. Double-check your information before lodging, seek professional advice before making unusual claims, and never ignore ATO correspondence.

By maintaining transparency and good record-keeping, you can face any ATO scrutiny with confidence — and stay focused on running your business, not defending your books.

How Does The ATO’s Data-matching Program Work?

The ATO uses a tool called data matching to compare information it receives from third-party sources (banks, employers, government agencies, online platforms, etc.) against the information taxpayers report on their tax returns.

In simple terms: if the ATO is told by a bank that you earned interest, or by an online platform that you sold goods, that information may be matched against what you’ve declared. If there’s a mismatch, the ATO may follow up.

Why does the ATO do this?

The program has a few key purposes:

  • To help individuals and businesses get it right, the ATO uses data to pre-fill returns and make it easier for taxpayers to lodge correctly.
  • To protect honest businesses from unfair competition by identifying those who may not be reporting all income.
  • To detect non-compliance (under-reported income, non-lodgment, etc) and to maintain community confidence in the tax/super systems.

What Kinds Of Data Are Matched? 

The ATO collects data from many sources. Some examples:

  • Investment income from banks and financial institutions.
  • Income from employment (and contractors) via employer reports.
  • Transactions from online-selling platforms, ride-sourcing, motor vehicle registries, cryptocurrency exchanges and other newer sources. 
  • Government payments and benefits (matching tax return data to benefit systems) via data-sharing with other agencies.

What Might This Mean For You? 

  • If you have correctly declared all your income, data-matching should support your correct return and reduce the likelihood of contact from the ATO.
  • If there is a mismatch (for example, interest earned was not declared or online-selling income was omitted), the ATO may contact you to request clarification. The mismatch does not automatically mean wrongdoing, but it can trigger compliance activity.
  • Good record-keeping remains essential: the data-match may identify “missing” items, but it is the taxpayer’s responsibility to ensure their tax return reflects all assessable income and correct deductions.

What Do You Need To Do?

  • Check that the income you have reported matches the information the ATO would have received (interest statements, contracting income, online sales, etc.).
  • If you use online selling platforms or receive payments in less traditional ways (e.g., ride-sharing, cryptocurrency), make sure to understand your tax obligations and keep proper records.
  • If you receive an ATO letter indicating a data-matching discrepancy, a prompt response is encouraged, along with reviewing your records to correct any genuine errors or, if necessary, amend your return.

In short, the ATO’s data-matching program is a powerful tool that uses third-party data to support good compliance, help honest taxpayers, and identify potential mismatches that may warrant further review. 

By being proactive and maintaining accurate records, you can keep ahead of the curve and avoid unpleasant surprises.

Understanding Negative Gearing in Australia

Negative gearing is one of those terms that is frequently mentioned in discussions about property investment and taxation in Australia. For some, it’s a smart wealth-building strategy. For others, it’s a source of confusion. Let’s break it down so you can understand what it means and how it works.

What is gearing?

“Gearing” simply refers to borrowing money to invest. This could be in property, shares, or other income-producing assets.

  • Positive gearing happens when the income you earn from the investment (like rent) is more than the expenses of owning it (like loan interest, rates, and maintenance).
  • Negative gearing is the opposite: your expenses are greater than the income from the investment, leaving you with a net loss.

How does negative gearing work?

Let’s use a property example. Imagine you buy an investment property and rent it out. You receive $25,000 a year in rent. But the costs of owning the property add up to $35,000 (loan interest, rates, insurance, repairs, etc.).

That means you’ve made a $10,000 loss for the year.

Because the property is income-producing, the Australian Tax Office (ATO) allows you to offset that $10,000 loss against your other income, such as your salary. If you earn $80,000 in wages, your taxable income is reduced to $70,000.

This reduces the amount of tax you pay and can make a significant difference at tax time.

Why do people use it?

On the surface, it may sound odd that people would deliberately take on a money-losing investment. The strategy makes sense when investors are banking on two key factors:

  1. Tax benefits – the immediate relief of reducing taxable income.
  2. Capital growth – the expectation that the value of the property (or other investment) will rise over time.

In other words, investors are often willing to accept short-term losses if they believe the property will appreciate sufficiently in value to generate long-term profits.

The risks of negative gearing

While negative gearing can be beneficial in certain circumstances, it’s not without its risks:

  • Cash flow strain – you still need to cover the shortfall between rent and expenses. If your financial situation changes, this can become difficult.
  • Interest rate changes – rising interest rates can increase your losses, making it harder to sustain the strategy.
  • No guarantee of capital growth – if property values stagnate or fall, you could end up with both a loss on paper and no growth in value to offset it.

Who does it suit?

Negative gearing is generally more attractive to higher-income earners. That’s because the tax benefits are greater when you’re in a higher tax bracket. For lower-income earners, the benefit may not outweigh the cash flow pressure of covering losses.

Negative gearing is a legal and commonly used tax strategy in Australia. At its core, it allows investors to reduce their taxable income by offsetting investment losses. However, it comes with real financial risks and isn’t suitable for everyone.

If you’re considering negative gearing, it’s essential to look beyond the tax savings and assess whether the investment stacks up overall. Speaking with an accountant or financial adviser can help you determine whether it’s the right approach for your situation.

Get Prepared For Your Return’s Lodgment Deadline

If you haven’t yet lodged your tax return, you’re not alone. With the 31 October deadline fast approaching, now’s the time to get everything in order so you can lodge on time and avoid penalties. 

A little organisation in these final days can save you stress and ensure you don’t miss out on legitimate claims.

1. Gather Your Income Records

Start by collecting all records of your income for the year, including:

  • PAYG payment summaries or income statements from your employer (available in myGov).
  • Bank interest statements.
  • Dividend statements from shares.
  • Any rental property income.
  • Income from side hustles, freelance work, or the gig economy.

Even small amounts matter—missing income can raise red flags with the ATO.

2. Pull Together Your Deductions

Deductions reduce your taxable income, so make sure you’ve got evidence for what you plan to claim. Common deductions include:

  • Work-related expenses (tools, uniforms, protective gear).
  • Home office expenses (if you worked from home).
  • Vehicle expenses where travel was directly related to your job.
  • Self-education expenses tied to your current employment.

Remember: you must have spent the money yourself, and it must relate directly to earning your income.

3. Review Investment Records

If you hold investments, gather:

  • Dividend and distribution statements.
  • Records of any shares or assets sold (for capital gains tax).
  • Rental property expenses such as interest, rates, insurance, repairs, and agent fees.

These ensure your return captures both income and deductions accurately.

4. Check Your Private Health Insurance

If you have private health insurance, make sure you’ve received your annual statement. This helps determine whether you qualify for the rebate and whether the Medicare levy surcharge applies.

5. Make Sure You’re Lodging on Time

If you’re lodging yourself, the deadline is 31 October. Missing it may result in penalties. If you’re working with a registered tax agent, you may be eligible for an extended lodgement period—but you need to be on their client list before the deadline.

A last-minute dash doesn’t need to be stressful. By pulling together the essentials—income records, deduction evidence, and investment details—you’ll be ready to lodge with confidence.

Need help getting everything in order before 31 October? You can still reach out to an accountant or tax adviser today. With professional support, you can be sure your return is accurate, compliant, and takes advantage of all legitimate deductions available to you. Plus, as an added bonus, if you engage an accountant, we can take the stress out of your hands, and may be able to lodge a return for you after the deadline. 

Is Your Vehicle A Work Vehicle? An Explainer Of The Tax Treatment

One of the most common points of confusion we see among clients is whether their vehicle is treated as a car or as a work vehicle for tax purposes.

On the surface, it seems like a small distinction, but the difference can have a big impact on what expenses you can legitimately claim.

Unfortunately, this misconception has caught a number of people out, with a notable example of one individual even having to sell a recently purchased vehicle and replace it with another after learning the hard way that not every ute qualifies as a “work vehicle.”

Let’s unpack the difference so you don’t end up in the same situation.

What The ATO Means By “Car”

The Australian Taxation Office (ATO) has a very specific definition of a car. For tax purposes, a car is a motor vehicle that:

  • is designed to carry less than one tonne of load, and
  • is designed to carry fewer than 9 passengers.

This definition captures most sedans, hatchbacks, station wagons, SUVs, and — importantly — many popular dual-cab utes.

If your vehicle falls into this category, it doesn’t matter if you use it primarily for work or business — it is still treated as a car under the rules. That means your claims are limited, and FBT (Fringe Benefits Tax) rules can apply if the car is provided to employees.

What Counts As A “Work Vehicle”

On the other hand, a vehicle that doesn’t meet the above definition falls into a different category. Work vehicles are generally those that are:

  • designed to carry more than one tonne, or
  • designed to carry 10 or more passengers.

This group includes larger commercial utes, vans, trucks, and minibuses. These vehicles are not considered “cars” under the ATO definition, so they are treated differently when it comes to FBT and deductions.

The Ute Misconception

Here’s where many people get caught out: just because you buy a ute doesn’t mean you automatically get to treat it as a work vehicle with all expenses written off.

If the ute is rated to carry less than one tonne, it’s still classified as a car. That means your claims are restricted, and you can’t simply deduct 100% of costs like fuel, servicing, or finance without proper substantiation.

One of our clients discovered this after purchasing a dual-cab ute, assuming it was a work vehicle. When the truth came out at tax time, they were left with fewer deductions than expected — and ultimately chose to sell the ute and purchase a vehicle that met the correct classification.

The Importance Of Logbooks

Even when your vehicle does qualify as a work vehicle, the ATO requires proof of business usage. This is where the logbook method comes in.

A logbook must record:

  • the date of each trip,
  • the odometer reading at the start and end,
  • the purpose of the trip (business or private), and
  • the total kilometres travelled.

It’s not enough to estimate or reconstruct later — the ATO places a high priority on accurate, contemporaneous records. We’ve seen multiple cases where legitimate business mileage claims were knocked back simply because the logbook was incomplete, inconsistent, or not kept for the required period (usually 12 continuous weeks).

Key Takeaways For Vehicle Deductions

  1. Check before you buy – don’t assume a ute is a work vehicle. Look at the manufacturer’s load capacity and passenger capacity.
  2. Understand the rules – cars and work vehicles are treated differently for tax and FBT.
  3. Keep accurate records – a proper logbook is essential if you want your claims to stand up under scrutiny.

A vehicle can be one of the biggest business expenses you make, so it pays to get the classification right from the start. 

If you’re considering purchasing a new vehicle, it’s always worth checking with us first so we can confirm how the ATO will treat it. A quick conversation upfront can save you from an expensive mistake later.

Professional Services Partnerships & Tax: What You Need To Know

When professional practitioners exit or retire from a partnership, their tax responsibilities don’t simply end with their departure. It’s important to understand that even after leaving a professional services firm, there are ongoing tax obligations that must be met. Neglecting these can lead to errors, oversights, or compliance risks.

First, any assessable distributions from the partnership need to be recorded properly. Even after you leave, your partnership agreement might continue to entitle you to distributions based on the firm’s profits. These payments are taxable in the year in which they are derived, and they must be declared as income—not treated as capital or pension-type payments. Unfortunately, former partners sometimes misclassify or omit such amounts altogether.

Also, retirement payments or deferred entitlements under partnership agreements require careful treatment. These are often profit allocations rather than pensions or superannuation. Misunderstandings about how these entitlements are structured lead to mistakes. It’s essential to check the specific partnership or retirement deed involved so you correctly classify and report these payments.

Another area that sometimes causes confusion is the capital account. This reflects your investment or share of equity in the partnership, which may result in capital gains or losses when you exit. However, not all losses are necessarily deductible, and not all gains qualify for discount. Proper record-keeping is required to determine what can be claimed, especially where there have been adjustments to the capital account around the time of exit.

Some practitioners also overlook obligations tied to related service entities or arrangements that involve associated entities (sometimes called service trusts or “Phillips arrangements”). If you’ve been involved in or benefited from such arrangements, you’ll need to ensure you understand how deductions and income allocations work in those cases.

To make sure you’re compliant when exiting a partnership:

  • Review your partnership agreement and final financial statements.
  • Seek advice early from a tax professional familiar with such setups.
  • Keep detailed records of all payments and correspondence post-exit.
  • Accurately report all income and distributions, including payments you’re entitled to but may not yet have physically received.
  • Correctly classify payments related to retirement and ensure capital gains or losses are properly calculated.

Leaving a firm might feel like the end of certain responsibilities—but in tax terms, many obligations persist. Getting the details right not only keeps you compliant but also protects you from unexpected liabilities down the line.

Looking for more tailored guidance about your situation? Why not speak to one of our trusted team to find out how we could help?

Home-Based Businesses And Claiming Deductions

If you run your business from home, you’re not alone—and you may be entitled to valuable tax deductions. 

The ATO allows deductions for the portion of your home expenses that relate directly to your business. 

Let’s break down the essentials so that you know what you might be able to claim on your tax return.

  1. What Counts as a Home-Based Business?

A home-based business is one where a part of your home is used for business—whether that’s a dedicated study or even a corner in your living space. 

The key rule is: only the business-use portion of expenses is deductible.

  1. Two Types of Expenses

  • Running expenses cover day-to-day costs like electricity, internet, phone, cleaning, and repairs. You can claim these even if your workspace isn’t a distinct “office” room.
  • Occupancy expenses include rent, mortgage interest, council rates, and insurance. These are only deductible if your workspace acts like a true “place of business”—for example, it’s used exclusively, clearly separate from your personal living space, or used by clients.

  1. How to Calculate Your Expenses

The ATO offers a few easy-to-use methods—choose whichever best suits your situation:

  • Fixed-rate method: Claim 70 cents per hour worked from home. This covers energy, phone, internet, stationery, and computer consumables. Just keep a record of your working hours.
  • Actual cost method: Claim your actual expenses (but only the business portion), provided you have the receipts to back it up.
  • Floor area method: If you have a designated workspace, apportion occupancy costs based on the floor area used for business and the time it’s used.

  1. Other Important Considerations

  • Depreciation: You can separately claim depreciation for business-use items like laptops, phones, or office furniture—regardless of whether you use the fixed-rate method.
  • Capital Gains Tax (CGT): If you sell your home and have claimed occupancy expenses, a portion may not be covered by the main residence exemption.
  • Records: Keep detailed records—including diaries of hours worked (if using fixed-rate), receipts, and calculations—for at least five years.

Understanding and claiming the right home-based business deductions can mean real savings—if you do it the right way. Keep it simple: choose the method that works best for your business, track everything, and only claim your fair share of the expenses.

Your accountant can help you choose the best method for your situation and ensure you’re both compliant and maximising your entitlements. Why not speak with one of our trusted team, and find out how we can help you and your business today?