An Accountants Guide to Christmas

The funny and serious side by Peter Morgan

Christmas presents a number of annual challenges for business, particularly around gifts, entertainment and Fringe Benefits Tax (FBT).

 Here are our recipes for another fun filled, tax efficient festive season.

 Gifts

The tax treatment of gifts depends primarily on whether or not the gift can be considered as entertainment – so tickets to the Broncos are not tax deductible (but tickets to Manly might be*).

For gifts which are not considered to be entertainment the Fringe Benefits Tax (FBT) and tax consequences are as follows:

1. Gifts to employees and family members of less than $300 – no FBT and a tax deduction is allowed;

2. Gifts to employees and family members of $300 or more – FBT is payable and a tax deduction is allowed; and

3. Gifts to clients, suppliers, etc. – no FBT and a tax deduction is allowed.

For gifts which are considered to be entertainment The FBT and income tax consequences are:

1. Gifts to employees and family members – FBT is payable and a tax deduction is allowed (except where the $300 minor benefit exemption applies); and

2. Gifts to clients, suppliers, etc – no FBT and no tax deduction.

*Not really

The Office Party

Christmas party costs are exempt from FBT provided that they are on a working day, at your business premises and include current employees only. Spouses or Associates may also be FBT free provided that they satisfy the $300 minor benefits exemption.

Many employers prefer to host Christmas parties off the business premises and these can also be FBT free if they satisfy the $300 minor benefits exemption. The $300 is assessed employee by employee and includes any gifts.

The cost of Christmas parties for employees is tax deductible only to the extent that the cost is subject to FBT. If the record keeping is too much bother and you would rather just pay some FBT and claim a deduction then you can elect for the 50/50 split method where 50% of the entertainment costs are subject to FBT and therefore become deductible.
Now for some Xmas fun

Christmas Cake

1 cup of water
1 cup of sugar
4 large brown eggs
2 cups of dried fruit
1 teaspoon of salt
1 cup of brown sugar
Lemon juice
Nuts
1 bottle of brandy

Sample the brandy to check for quality. Take a large bowl. Check the brandy again. To be sure it’s the highest quality, pour one level cup and drink. Repeat.

Turn on the electric mixer, beat one cup of butter in a large fluffy bowl. Add one teaspoon of sugar and beat again. Make sure the brandy is still OK.

Cry another tup. Tune up the mixer. Beat two leggs and add to the bowl and chunk in the cup of dried fruit.

Pick up fruit from floor. Mix on the turner. If the fired druit gets stuck in the beaterers, pry it goose with a drewscriver

Sample the brandy to check for tonsisticity. Next, sift two cups of salt. Or something. Who careshz? Check the brandy. Now shift the lemon juice and strain your nuts.

Add one table. Spoon the sugar or something. Whatever you can find. Grease the oven. Turn the cake tin to 350 degrees. Don’t forget to beat off the turner. Throw the bowl out of the window. Check the brandy again and go to bed.
Merry Xmas from all of us at Munro Accountants– Click here for our special Xmas message

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