Talking Cents

Tax tips for Christmas Time from the small business accountant in Sydney

For some of you, 2015 may have been one of the busiest years of your business. As the year now winds down and our attention turns to the Christmas season, we, the small business accountant in Sydney, can see many small businesses are eagerly anticipating and looking forward to the holiday celebrations with their colleagues and loved ones.

Before you go out spending thousands on a staff Christmas party to stand out from the rest of the employers, there are a few points from a tax perspective that should be followed. For both GST and income tax purposes, a Christmas party and associated expenses are in most cases not a tax-deductible expense. In fact, if not handled correctly, Fringe Benefits tax could instead be applicable on your Christmas party.

The small business accountants in Zetland, m.a.s accountants, have come across a few clients who have previously spent a lot on holiday celebrations with staff, only to realise these were not deductible. To ensure this does not happen to you, here are a few key points to allow your business to celebrate Christmas and the years' achievements without any tax hassles.

The costs of food and drink are exempt from FBT if they are provided on a working day on your business premises and consumed by current employees. A taxable fringe benefit will arise in respect of an associate of an employee who attends the party if not otherwise exempt under the minor benefits exemption. To be able to claim the onsite party expenses, it must be held on site for staff and clients only and involve a light meal or finger food and must not include alcohol.

Similarly, the cost of providing a Christmas party is income tax deductible only to the extent that it is subject to FBT. The costs of entertaining clients are not subject to FBT and are not income tax deductible.

The most tax effective way to reward staff is with a non-entertainment gift, for example, providing your staff with gift cards valued under $300.00. Not only are these expenses fully tax and GST deductible, but they are also not subject to FBT.

Examples of expenses which fall under entertainment are theatre, movie or sporting event tickets. These costs will not be subject to FBT if they are kept under $300.00. On the flip side, you are also not able to claim a tax deduction or GST credit for such expenses. Per person, if they exceed $300.00 then the expense is subject to FBT.

FBT and GST deductibility of Christmas party expenses is a rather complex and too often ignored area of small business. Depending on your business situation, we suggest you seek advice specific to your circumstances from your small business accountant in Sydney to ensure the happy times continue throughout the year and not just Christmas.