Christmas and school holiday season - for some business owners it’s a great time to relax and rejuvenate, but for many, it can be a very stressful time. Depending on your industry, there’s the added administration of ensuring your staff take the holiday time they want, while still covering all necessary shifts and completing the workload, with far less hours due to all the public holidays.
From an administration and bookkeeping viewpoint, it’s important to go into the silly season with full clarity around how and when to pay employees, with leave loading and penalty rates if necessary. And when it comes to your Christmas party and gifts for your employees, it’s an overly complicated area ... that’s why we’ve written this blog … to ensure you’re well prepared and understand how to record your Christmas season transactions.
So, let’s get started with the most common misconception ….
Tip 1: You can’t claim Christmas Party expenses as a business tax deduction
Some of you may not be aware, but you are no longer entitled to claim food, drink and entertainment at your work Christmas Party as a business tax deduction. And importantly, that means you can’t claim the GST credits either.
We know it’s not what you want to hear, but that’s the rules, so make sure you talk to your bookkeeper on how to categorise these expenses!
In general, if you hold the Christmas Party for your employees, on a workday at your premises, you can spend up to $300 per head without any Fringe Benefit Tax implications. This is an extremely simplified overview of the FBT rules for Christmas parties and can be a complicated area, so if you think you might step outside of these basic guidelines, don’t hesitate in giving us a call.
You can read more at: https://www.ato.gov.au/general/fringe-benefits-tax-(fbt)/in-detail/fbt-and-christmas-parties/
Tip 2: Christmas Gifts you buy for employees CAN’T be claimed as a business expense
Gifts you CAN’T claim as a business deduction: (which means you also can’t claim the GST!)
Any gifts you buy for your employees
‘Entertainment’ gifts to customers and suppliers
Gifts you CAN claim as a business deduction:
Non-entertainment gifts to customers and suppliers
So what is a ‘non-entertainment’ gift? It could be a bottle of wine or spirits, a hamper or gift vouchers for a store or online purchase; anything that’s not ‘entertainment’, such as tickets to a sporting or theatre event, travel vouchers or a voucher for a restaurant meal.
It’s also important to note that gifts over $300 to employees will be subject to FBT.
Again, this can be complicated, so deciding whether to claim the expense is something you should talk to your bookkeeper about to get the best tax outcome for all.
You can read more at: https://www.ato.gov.au/law/view/document?locid=%27FOI/1011305P%27&PiT=19990616000001
Tip 3: Record your Christmas transactions where your bookkeeper and accountant can clearly see them
Why not let the experts handle the tax implications of all these items? Before you record your Christmas party and gift transactions in your accounting system, have a quick chat with us and we’ll show you exactly which categories you need to use to record these expenses so they show up in the Profit & Loss and Balance Sheet in a way that we can deal with them in the best possible way. By recording these items clearly, in a way that your bookkeeper or accountant can identify them, you can rest-assured that the tax implications will be considered in your best interests and for your best outcome.
Tip 4 : Be prepared for paying your employees their correct entitlements
It may seem obvious but being fully prepared and one-step ahead when it comes to paying your employees over the holiday season, will make life so much easier and stress-free. As a business owner, you’ve got a lot to deal with over the holiday season, so understanding your obligations is imperative. Even if you have a bookkeeper or an employee who does your pay-run, as the owner, having an understanding of what your employees will be paid, and how it will impact your cash-flow will mean you won’t have to deal with any ‘unexpected surprises’, next time you look at your financials.
You can read more about your obligations here :
https://www.fairwork.gov.au/newsroom/news/rules-and-entitlements-during-end-year-holiday-season
Tip 5 : Relax and enjoy the holidays
This is a tip I need to take onboard myself! If you’ve been fully prepared in the build up to the holiday period, then you should be able to sit back, and take some time for yourself to relax and rejuvenate. It’s important to have some downtime with family and friends, so do everything you can to be organised enough to turn off your devices (for one day at least) and join in the festivities.
We hope this blog has helped, just a little, in understanding the complexities of Christmas accounting – it really is a minefield. It might have brought up some further questions, so again, the best advice I can give, is for you to make time to chat with your bookkeeper or accountant when it comes to your Christmas transactions – after all….that’s what you pay us for!
HAVE A HAPPY AND MERRY CHRISTMAS SEASON.
