Has Christmas crept up on you this year? Don’t worry, us too.
The present shopping, holiday planning and end-of-year functions are all fast approaching and it’s easy to feel like you are drowning in festive cheer…
But before you go out and splurge on expensive staff gifts and copious amounts of food and wine for the office Christmas party, it might be time to book an appointment with your local Whitson Dawson accountant to avoid a hefty fringe benefit tax going into the New Year.
So, what financial considerations need to be made before December 31?
Fringe Benefit Tax
Fringe Benefit Tax (FBT) can be costly to a business if employers aren’t careful. At a marginal tax rate of 47%, FBT is charged to employers that provide employees with non-cash benefits such as free travel, food and drink, gifts, and motor vehicles.
Work Christmas Party
The annual work Christmas party is important for business morale, staff bonding and is a much-needed celebration after a long year of work.
However, to avoid paying fringe benefit tax you must keep costs to less than $300 per head.
You can also choose to hold the Christmas party on your work premises on a work day, so the property benefit exemption is applied to current employees.
Don’t forget to record a list of attendees in your accounting software with current employees, associates and clients separated.
Staff Christmas Presents
The same rules apply for staff Christmas presents. To avoid paying the fringe benefit tax, you must keep the cost of staff presents to less than $300 per person.
If you would like to spend more than $300 per person, a cash bonus provided as part of staff salaries is a common alternative.
December is like a mid-way checkpoint to assess how your yearly budget is going. Are you hitting the mark or do you need to make adjustments to ensure you can get through the next six months stress-free?
Now is a good time to visit your accountant who can help analyse your current cashflow and expenses. It is recommended you create a roadmap that outlines how you will spend your remaining budget before EOFY and where, if necessary, you need to make changes to save cash.
Your Tax Situation
With only six months until EOFY, it is important to assess your taxable income and take advantage of ways you can reduce taxable income next year. For example, if you pay employee bonuses by December 31, you can claim those on your 2021 taxes.
It is also a good time to ask your accountant whether you have underpaid any estimated tax payments, to ensure you avoid ATO penalties.
While it can be tempting to keep the doors open over the Christmas period, we recommend enjoying the holidays and recharging before you jump straight back in next year. A rest will boost productivity from happier employees and allow for cost savings from reduced overheads, particularly if a lull in customer trade is likely.
To ensure a productive December and a peaceful Christmas break, book a consultation now with one of our friendly Whitson Dawson accountants and start your new year on the right track.
Remember, managing your finances doesn’t have to be stressful!
Until next time,