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.