Top 5 Christmas FAQs
Top 5 Christmas FAQ’s
Christmas is coming and I hope you will have the chance to take a break and relax with your families. Small business never really stops though does it, so I thought I would share the top 5 questions that are frequently asked by our clients around this time of year. Hope that there is something in here helps you get through this crazy time of year.
1. How do I account for our work Christmas Party
Christmas is the perfect time to celebrate the year but there are a few things to consider when organising your work Christmas party.
Typically, FBT will not apply, and therefore there will be no tax deduction nor any GST credit claimed, if the party costs less than $300 per person (that’s right – you cannot claim GST on the Dan Murphy’s invoice just because you were buying drinks for Christmas). If the function costs more than $300 per employee, you should check with your tax accountant as to what might be able to be claimed.
Celebrations with customers or clients do not attract FBT and so are also not tax deductible nor claimable for GST purposes.
It’s also important to remember that as an employer, you have a duty of care to your employees at the party whether it’s held onsite or not. To ensure that your employees remain safe, you should identify potential hazards and minimise these as much as possible. If you are serving alcohol, proper risk management strategies may save your business from costly compensation bills.
2. How do I pay my employees a Christmas bonus?
A bonus is a great way to thank your employees for their work during the year. Bonuses must be paid via the payroll which is easy to set up in Xero. Before paying a staff bonus, you will need to set up a separate pay item ( in Settings/ Payroll settings). Xero will then do the hard work for you in calculating the appropriate amount of tax to deduct from the bonus payment, which is based on the employee’s overall salary for the year. PAYG tax needs to be deducted from the bonus and superannuation will apply in most cases. Please check with us if you are not sure.
3. Can I ask my employees to take leave if we are shutting down over Christmas?
All full-time and part-time employees must be paid during a period of shutdown and this is usually treated as leave. Casuals are not paid during this time given that no work is undertaken.
The Award or Agreement under which your staff are employed may confirm if you can advise your employees that they “must take leave” during the shut down. The Award may however indicate that you can only request the employee take leave. Most awards require at least 4 weeks notice of a shut down period to be given to employees.
If nothing is stated in the Award or the Agreement about leave during a shutdown period, then you can’t force your employees to use their leave or take unpaid leave. You may be able to negotiate an arrangement that works for both parties, such as partial paid and unpaid leave.
Your relevant award or agreement will also direct you as to what to do in the event that there is not enough leave accrued to cover the shutdown period. Some awards state that the employee can receive unpaid leave during the period; whereas others are able to take paid leave in advance. If the employee does not agree to take unpaid leave or leave in advance, they are entitled to be paid their usual wages.
When public holidays fall during an employee’s leave, these are to be treated as public holidays and not as annual leave – it is treated as though they would have worked that day should they not have been on leave. The public holiday pay should not affect their leave accrual, and simply be paid as another working day.
4. Can I claim GST and a tax deduction on gifts to customers and staff
Gifts to staff are treated differently to gifts to suppliers or customers. Gifts to staff that are valued at less than $300 are not tax deductible so you can not claim GST on them .No FBT applies to employee gifts of this value.
Gifts to employees worth over $300 may attract FBT ( so check with your accountant and enter them in a separate account category in Xero to make things easier).
If you buy a gift for a client or supplier, you can only claim a tax deduction and claim the GST credit if the gift is not considered to be entertainment in nature. Wine, hampers, gift voucher, flowers etc are not considered to be entertainment so you can claim these.
Tickets to events, meals out, flights and holidays etc are considered to be entertainment and so you can not claim these as a deduction or claim the GST credit on these.
5. Is Santa Clause real?
Well Santa has always been real in my house, even for my adult children who realise that while Santa survives, the gifts keep coming.
Whilst Christmas is fun and my favourite time of year, there are still some accounting rules to follow during this time. If I can help you in the lead up to Christmas, or if you have questions regarding any of the above, please contact me.
Christmas is a time to enjoy, reflect and recharge for the New Year and Balanced Advantage will be taking a short break from 19th December returning on the 5th January. I wish you and your family the very best of times during the Christmas period and look forward to working with you in 2023.
Deanna