Advivo shares the important things to know about getting the best end of staff gifts and celebrations this Christmas season.
Christmastime always comes with plenty of expenses that need to be dealt with, and as such, you should be looking at every way that you can keep your costs managed and your tax deductions claimed. There are three main kinds of Christmas expenses you might consider for your business, those being Christmas parties, gifts and bonuses.
Staff Celebrations
Christmas celebrations are a common way for businesses to kick off the end of the year and give their staff some time to relax and wind down. Holding these celebrations off-site is considered for all intents and purposes to be an “entertainment” expenditure and thus needs to be considered under the fringe benefit rules.
Generally:
- if the cost per employee is under $300, then it will be considered exempt from fringe benefits tax (FBT), which also means there is no GST claim or income tax deduction allowed.
- If the cost per employee is $300 or over, then the amount paid will be considered a fringe benefit and FBT will be payable on that amount. If FBT is payable, then you can claim GST and an income tax deduction.
So, which is best? Given the FBT rate is higher than the company tax rate, where possible it’s best to reduce the amount of FBT payable regardless of forgoing the GST and income tax deductions. This means it’s good practice to try to keep the cost per employee to under $300 where possible. If FBT is unavoidable, this is dealt with for the FBT year of 1 April 2023 to 31 March 2024 which is lodged via an FBT Return due in May 2024.
Staff Gifts
Staff Gifts are treated similarly to the ‘entertainment’ expenditure above and the same minor benefit $300 exemption applies. When considering gifts, a better net cash position will result if you can keep the costs of employee gifts to less than $300. Client and supplier gifts are treated differently again and are normally deductible unless they’re tickets to a theatre, movie or sporting event, etc.
Bonuses
If you prefer to give out Christmas bonuses as a way to thank your employees, these bonus payments are treated in the same way as salary and wages, and therefore superannuation, PAYG withholding and payroll tax may be applicable. Depending on your circumstances, it may be prudent to link Christmas bonuses to your overall remuneration strategy to further maintain alignment between individual and business goals.
It is always best to consider the tax implications of your Christmas festivities whilst planning them. To learn more about your Christmas finances, contact us today. At Advivo, we have a talented team of accountants and business advisors who will listen to you and take a hands-on approach to managing your business and individual financial needs.
