The Christmas season is generally a time for merriment as much of the country winds down to enjoy a break. While the nature of many small businesses means that their owners may not be able to take a huge amount of time away from their operations, there are a few things they can typically do to relax.
To that end, throwing a Christmas party can be a great way to engage with staff, and ultimately mix business with pleasure in the most fun way possible. However, while such events are obviously a time for celebration, there are a number of financial nuances that have to be considered.
Fringe benefits tax has to be considered when rewarding staff across the festive season.
Keeping the facts and figures in check is certainly by no means easy, especially if this Christmas is your first in charge after taking the reins of a business for sale. So, if you're looking for advice, here's what you need to know about how the Australian tax system could affect your festive celebrations:
Accounting for the Christmas party
The Christmas party is the perfect way for small business owners to reward employees for their hard work across the last year. However, did you know that the business needs to take fringe benefits tax (FBT) into consideration?
Essentially, this method of taxation covers any perks that employees receive outside of their salary packages. However, as Taxpayers Australia pointed out, it's not like the taxman doesn't know how to have fun, as Christmas-time entertainment up to the value of $300 per person is exempt from FBT.
Consequently, unless you're planning on an especially grandiose party, you'll likely escape any extra outlay associated with FBT.
As SmartCompany contributor Mark Chapman explained, the vast majority of taxation surrounding a Christmas party or any additional festive rewards falls on the employer, so staff can feel free to eat, drink and generally be merry.
However, as a small business owner, there are some specifics of what can and can't count as tax deductible across the festive period. Specifically, a general rule is that FBT is relatively avoidable for most Christmas parties, but they aren't necessarily deductible from an income tax perspective, and there's no way of claiming back goods and services tax credits either.
All in all, the Christmas party may seem like a great time to let loose and have fun. There's no denying that it is, but if you're relatively inexperienced as a business owner or need to garner further knowledge about the nuances of taxation, it's well worth chatting things through with your accountant before the holiday season hits full swing.