Bill is an awesome accountant…
When it comes to your business end of year Christmas party, the hardest part should be finding something the majority want to do; booking it in and deciding on a menu or activities. These days though, more thought needs to go into your staff Christmas party. Here are a few reminders and a little bit of tax guidance when it comes to Christmas parties, gifts, and FBT.
WH&S – whilst not a tax issue, workplace health, and safety is applicable to any work event – either on-premises or away. You have a responsibility to ensure your staff have a safe place to enjoy a little unwinding. For this reason, it’s wise to put the team into a taxi and, of course, ensure there is enough food (and perhaps not too much alcohol) so that accidents do not occur. It’s also wise to limit your own drinks consumption; just so you can stay alert, and ensure everyone stays safe. Whilst sad, the reality is that we live in a very litigious society and caution is needed.
The party itself. When choosing an activity or venue, try to consider the majority of your team. Not everyone will enjoy paintball or the speedway. Nor may everyone enjoy a high tea. Whilst a cruise on the bay could be exceptional, some people don’t handle being on the water well, or need to be able to get home quickly should kids get sick. You won’t be able to do exactly everyone’s first choice but take the time to ask your team what they would like to do – if nothing else – to get some ideas.
Next, you need to decide if this will be a joint party with staff and clients or just staff. Put aside the tax perspective for a moment (I’ll come to that shortly) – consider your team. This should be their event in recognition of a year of hard work – rather than a marketing event where they need to be entertaining clients, chatting with them pleasantly and behaving appropriately. A joint event may be efficient, but not necessarily appropriate or fair to your staff.
Next to consider is whether partners come. I would suggest you talk to your staff and perhaps get a vote. Naturally, the size of your business may determine this question, but where possible you may want to go with what the majority want.
Next, remember that U18s cannot consume alcohol – regardless of parent permission. If you have U18’s I’d be emailing or writing to all parents to advise them about how the party will be run, that their child will not be given alcohol, although alcohol will be present. You also need to seriously talk with your staff. They may think it’s ‘cool’ to spike little Johnny’s soft-drink – make sure they clearly understand there will be zero tolerance of that.
If you have staff whose religion does not include Christmas, you may want to adjust things slightly. It may be called a “Year End Party” and if you are going to do a ‘secret santa’ or such, perhaps do that first up at a designated time, in order that the others can plan their arrival afterwards if they prefer. It’s not about removing Christmas from the rest of your team, just being respectful to those who do not believe.
Finally, think about how staff will get home safely; your responsibility doesn’t stop with you paying the bill at the end of the night. The taxi fares (from a tax perspective) are treated same as the event from a FBT and tax perspective.
Now let’s have a look at the tax side of things so that you can decide on how best to organise your staff Christmas Party.
When a party is FBT Exempt – if the party is for current employees only and on business premises on a usual working day and as long as the per head cost is below $300 each. Remember that entertaining clients is not subject to FBT (Fringe Benefits Tax) but it’s also not a tax deductible item. Some other examples of FBT-able benefits include:
- allowing your team member to use a work car for private purposes
- giving your team member a discounted loan
- paying their gym membership
- giving them entertainment via free tickets to concerts
- reimbursing a personal expense, such as school fees.
Remember that if you are the Director of a company or the Beneficiary of a trust working in the business, any benefits you receive in connection with your employment may be FBT applicable.
Gifts – for your staff is FBT exempt if the gift is less than $300 and generally it is tax deductible, although there are some exclusions. For example, if you gave them a lovely bottle of wine, but it was consumed at the event or on premises, then that is not allowable. However, if they take the bottle of wine home, that is allowable and deductible. This same philosophy applies to clients as well. It’s fine to gift a bottle of wine – as long as they don’t open it then and take it home.
GST – with all of this, if the item is not an allowable deduction, then the GST is also not allowable and should not be claimed on your BAS.
When recording this transaction, ensure you give your bookkeeper or accountant as much info as possible so that they can treat this item in the right way. Unfortunately, the ATO have made it very hard for us to reward our hardworking employees (and valued clients) but we need to remember that ‘entertainment’ hasn’t been allowed for many years (decades). Whilst parties are somewhat difficult to claim, remember that you do have the ability to gift them something nice, for example:
- Voucher for a nice in town or on the Coast
- Restaurant Voucher
- Gift Card
- Wine or alcohol
Bonuses – now is also the time to think about staff bonuses. Whilst some employers consider what sort of a year they have had and if profit isn’t so high, they are inclined to say “we can’t afford it” give careful consideration to whether it’s deserved. If your team have worked super hard, then consider a bonus still, even if it’s a bit less, still something. Being totally ‘forgotten’ at Christmas time might inspire some of your exceptional team to re-assess if your business is the right place to be. People stay in a business for many reasons; money is one of them, but also feeling valued and getting opportunities are two other critical reasons that staff stay on (or move away).
Now, having borne all the negative and bad news – I do wish to take this time to wish you all a wonderful Christmas.
As an experienced and qualified accountant, there are a large number of ways that I help my valued clients – both individuals and businesses. However, it’s interesting that sometimes a client will ask me if I do something. So I thought this article might be useful for you generally. If you are ever unsure if your accountant can help you … just ask, or feel free to ask me.
- Tax Services. This one is fairly obvious and hence top of the list. Yes, we do tax returns and provide advice around taxation. What I find is that sometimes a client doesn’t realise something is claimable until that conversation comes up. Or perhaps they want to claim something, but it can be relevant to timing, method or some other factor. That is why it’s always a great idea to talk to your accountant BEFORE you go to do something substantial – whether it’s buying an investment or selling a vehicle. Naturally, if you’re looking at investing or getting into rental properties, your accountant will likely become your next best friend. Knowing how different things can affect you can be relevant in your tax planning and in getting more money in your pocket.
- Structure Setup. Choosing the right form of entity of your business (e.g. company, trust, partnership, sole trade etc) is a crucial decision that can have longstanding and substantial tax implications. Additionally, we need to consider asset protection as well as many other considerations. One size does not fit all, and every structure should be relevant to you, your activities, needs and specific circumstances.
- Accounting Services. This is general ledger and financial statement preparation and incorporates bookkeeping (monthly/quarterly/annually), Accounting system setup for new businesses. It then flows through to the preparation of tax returns. Again, this is one of the core services many firms provide, although some do not provide the bookkeeping services. We work in all accounting programs, including Xero and MYOB. Your daily business operations will surely run efficiently if you have organised and meaningful financial records. They are the foundation of a successful business. Did you know that poor bookkeeping is the reason that 5% of businesses fail?
- Accounting Software Selection and Implementation. There are many computerised accounting software for use by individuals and small businesses. Some accounting firms (including Southern Cross Accounting Redlands) can help you select the one which is applicable to you.
- Audits & Reviews. Accountants deliver constructive solutions to maximize your company’s profitability and proficiency. They deliver good financial reporting on all three levels of assurance. This can incorporate Audits which not all firms will provide due to high insurance costs and the need for ongoing specific professional development.
- Financial Forecasts & Projections. Forecasting is beneficial when you want to successfully lead and manage your business’ profitability. This can be from very simple projections to complex and detailed financial modelling. This is one of the critical steps to achieving your business’ financial goals.
- Cash Flow and Budgeting Analysis. A business can earn great profits but have problems due to cash flow concerns. To help, we can project and assess your company’s financial status, estimate financing requirements and track cash flow sources and uses.
- Estate and Trust Tax Preparation. Estate and gift planning done effectively will help get your assets transferred to your beneficiaries with ease. It will surely give security to your living partner and heirs and can also try to cut the tax required for the transfer of business and assets. For business owners, it is essential to make sure that the business will run continuously and the succession of ownership will be smooth.
- Consulting Services. For your business, your accountant will begin by helping to identify areas negatively affecting profitability and growth. Perhaps you are considering buying or selling a business? Then you definitely need to talk to your accountant! Perhaps you need assistance with financial retirement decisions or are looking at a merger or acquisition. You may be about to become divorced and solid accounting advice in advance may be very beneficial. Accounting advice is where we really can provide extensive value in expert advice. Doing things right can mean a huge difference in the end result of money in your pocket (or not).
- Self-Managed Super Funds & Other Entities. Whether you’re looking at setting up a charity or a self-managed (DIY) super fund – your accountant is absolutely the person you need to speak to before you get started. We’ll discuss with you the relevance to what you want to do, the costs, pros, cons, requirements and the contribution that may require on your part.
Of course, your trusted accountant can do more, but this is just the basics. Don’t assume all accountants do all things (some do not) nor that they are experienced in all aspects. If you have a need, be sure to ask, rather than assume. Some accountants also specialise in different areas, such as Import/Export, or perhaps International Business or Bankruptcy – so if you have a specific need, again ask. If they cannot assist you, they may well be able to refer you to a specialist who can help you. If I can help you in any way, or you have a question, please feel free to drop me an email or give me a call – happy to have a chat and see how we can help you in your future business or wealth growth endeavours.
Under the new ‘employer focused’ Jobactive model there is now a vast pool of job ready candidates who attract a wage subsidy. Gone are the days of wage subsidies being reserved for only the very disadvantaged job-seekers. Today, the majority of Jobactive candidates attract a generous wage subsidy:
- Over 50s ($10,000)
- Youth 15 – 29 ($6,500 – $10,000)
- Indigenous ($6,500)
- Parents returning to work ($6,500) and
- The longer-term unemployed ($6,500)
Tax consequences of Christmas parties and gifts
Merry Christmas, Thought I’d give you the following gift – everything you need to know about the tax consequences of Christmas parties and gifts.
Gifts to customers, suppliers and their associates
Gifts such as hampers, beer, wine, spirits, food, flowers, perfume, pens, typical promo and marketing gifts (coolers, bags, BBQ sets) and gift vouchers (generally) are deductible and the GST is claimable. These items are generally coded to ‘Advertising and promotion’ or ‘Donations and gifts’.
Entertainment gifts to customers, suppliers and their associates
Tickets to football games, movies, theatre/live performances, theme / amusement parks, circuses and airlines are non-deductible, and the GST isn’t claimable. These items are generally coded to ‘Entertainment – Non-deductible’.
Entertainment and gifts to employees and their associates < $300
All the above items for employees and their associates, where per item per person, the cost is less than $300 (in total), the expenses are non-deductible, and the GST isn’t claimable. In most cases the food is less than $300 and the drink is less than $300 per person. These items are generally coded to ‘Entertainment – Non-deductible’.
Entertainment and gifts to employees and their associates > $300
All the above items for employees and their associates, where per item per person, the cost is greater than $300, the expenses are tax deductible and the GST is claimable, but the expenses are subject to FBT – contact me for more information. These items are generally coded to ‘Entertainment – Deductible’.
Food and drink on premises
There is an exemption under the FBT Act for food and drink supplied on premises for employees during work hours (but not associates). The expenses are tax deductible and the GST is claimable. Mostly these expenses are coded to ‘staff meetings’ but Christmas parties (onsite during work hours) would be coded to ‘Entertainment – Deductible’. For associates the rules are the same as outlined above.
I never recommend this method so if you’re going to provide entertainment to customers, suppliers and their associates and employees and their associates (e.g. corporate box) keep a record of customers, suppliers and their associates versus employees and their associates. Happy Holidays. Thanks, and if you have any queries call me on 1300 722 570 or email firstname.lastname@example.org Regards, Bill Parkes Director Southern Cross Accounting – Redlands