Christmas is the perfect time to celebrate your team’s hard work and toast to the year’s successes – but it’s also a time when tax regulations can sneak up on you like the Grinch. But don’t worry! With a bit of planning, you can enjoy the festivities without any surprise tax bills lurking under the tree.
Here’s how to prepare your practice for Christmas while keeping your tax strategy on point.
Plan your Christmas Party without the FBT hangover
Who doesn’t love a good Christmas Party? It’s the perfect way to thank your team for their hard work throughout the year. But before you pop the champagne, make sure you’ve got your Fringe Benefits Tax (FBT) sorted, so the celebration doesn’t come with an unwelcome tax bill.
- On-premises parties: Hosting the party at your practice? Great news! If it’s held on a working day and only current employees attend, the costs (food, drinks, and entertainment) are FBT exempt. So you can celebrate with your staff without worrying about tax implications.
- Off-premises parties: Understandably, you will probably want to get away from the practice and take the party off-site, perhaps to a restaurant or event venue? You can still avoid FBT if you use the Minor Benefits Exemption. To qualify:
- Keep the cost under $300 per person inclusive of GST (including employees, their plus-ones, and clients).
- Hold the party on a working day.
However, while you may avoid FBT with these rules, remember that Christmas Party expenses – whether held on and off site – aren’t tax deductible.
Gift giving: Showing appreciation to your staff without the tax sting
Christmas gifts are a fantastic way to show your staff some extra appreciation. To ensure you don’t pay FBT on top of the gifts and blow out the budget, it’s important to be aware of the below rules:
- Non-entertainment gifts: Christmas hampers, gift vouchers, or bottles of wine for your team are non-entertainment gifts. As long as these gifts are under $300 (including GST), they’re FBT exempt AND tax deductible. So not only will your team love their gifts, but you’ll also get a tax benefit. Win-win!
- Entertainment gifts: Tickets to a concert or a weekend away? These count as entertainment under tax rules. You can still apply the Minor Benefits Exemption if the cost is under $300 (inclusive of GST), but they won’t be tax deductible like non-entertainment gifts.
Shutting down over Christmas? It’s crucial you get your timing right
If like many businesses you’re planning to close your practice over Christmas, it’s important to be aware of the Fair Work rules and the Award Conditions around your employee’s leave during temporary shutdowns.
- 28-day notice for annual leave: If you’re requiring your employees to take annual leave while your practice is closed, the law says you must give them at least 28 days’ notice in writing. A notice of requirement can be found here, if your award requires it.
- Employees without sufficient leave: If an employee doesn’t have sufficient annual leave, you may need to come to an agreement with your employee to use accrued time off (if applicable), leave without pay or annual leave in advance. Please refer to the Award if this applies to you. The Award also contains a handy downloadable template for an Annual Leave in Advance Agreement which outlines conditions – such as if not enough leave has been accrued back before end of employment etc.
Give your team plenty of time to prepare for the break, so they can relax and enjoy their holiday while knowing exactly where they stand with their leave entitlements.
Enjoy the festivities without the financial stress
The holiday season is meant to be fun and relaxing – not a time to stress over tax rules. If you need any advice on FBT or tax planning for your practice, please get in touch.
