Photo by JESHOOTS.COM on Unsplash
Can You Avoid Giving the ATO a Gift This Christmas?
The festive season brings joy and celebration, but it also raises questions about tax obligations for businesses. Whether it’s Christmas parties, gifts, or entertaining clients, here are the key points to help you navigate the tax landscape.
The Top Christmas Party Questions
Making Staff Christmas Parties Tax Deductible or Tax-Free
While it’s unlikely to completely avoid tax, structuring your celebrations strategically can minimize fringe benefits tax (FBT). Here’s how:
No FBT: Host the party in the office during a workday. Food and drinks provided in the workplace are generally FBT-exempt. Taxi travel starting or finishing at the workplace is also exempt.
Low-Cost Celebrations: If hosting outside the office, keeping costs under $300 per person (the FBT minor benefit limit) usually avoids FBT. However, this means you can’t claim GST credits or a tax deduction.
Tax Deductible Extravagance: For higher-cost events exceeding $300 per person, FBT applies. The upside? You can claim a tax deduction and GST credits.
Gifts for Clients and Staff
Are Client Gifts Tax Deductible?
Yes, if the gift is given with the expectation of benefiting your business, such as enhancing client relationships or securing future work. However, entertainment gifts like event tickets or golf outings are not deductible.
What About Gifts for Staff?
Keep gifts spontaneous and under $300 per person to avoid FBT.
Avoid ongoing benefits like gym memberships that might breach the minor benefit limit.
Cash bonuses are treated as taxable income, like salary and wages.
Entertaining Clients: Deductibility Rules
While catching up with clients over lunch or drinks is a great way to strengthen relationships, the cost of entertaining clients (food, drinks, or other entertainment) is not tax deductible, regardless of the occasion.
What’s Ahead in 2025?
Federal Election and Budget
The 2025-26 Federal Budget is scheduled for 25 March 2025, suggesting an election in March or May. This will impact the passage of several key legislative proposals.
Legislative Changes in Limbo
Superannuation Earnings Tax: A proposed 30% tax on earnings for balances over $3 million is stalled in the Senate.
Instant Asset Write-Off: The $20,000 threshold for small businesses was removed from legislation, leaving SMEs uncertain about tax treatments for asset investments.
Tax and Superannuation Updates
Capital Gains Withholding: From 1 January 2025, withholding for foreign residents increases to 15% and applies to all property sales, regardless of value.
Superannuation Guarantee: The SG rate will rise to 12% on 1 July 2025.
Paid Parental Leave: Superannuation contributions will apply to Paid Parental Leave payments starting 1 July 2025.
Other Key Changes
Wage Theft Criminalised: Intentional underpayment of workers will face significant penalties from 1 January 2025.
Phasing Out Cheques: Cheques will no longer be issued after 30 June 2028, with acceptance ceasing by 30 September 2029.
Christmas Wishes and Office Closure
We wish you and your family a joyful and safe Christmas season. Thank you for your continued support throughout the year.
Our office will close on Friday 20th December 2024 at 5pm and reopen on 2nd January 2025 8:30am.
Quote of the Month
“If you haven’t got any charity in your heart, you have the worst kind of heart trouble.” — Bob Hope, Comedian
Final Thoughts
The festive season is a time for celebration and reflection. As we move into 2025, we hope for greater stability and opportunities. Let’s make the new year a success together!
Comments