Christmas Time Parties, Gifts and Donations
By Paolo Coniglio, 11.12.2020
Clients and Employees’ Gifts
Christmas is a time for businesses to take the opportunity to express appreciation to their clients and employees for their loyalty and support. 65% of employees feel that recognition improves engagement and helps build trust to improve their relationships with employers. However, for an employer, there is more to consider behind giving a gift to employees or organising a Christmas party.
As Christmas parties and gifts are typically expenses that come across during this time, these transactions have very specific GST and Tax implications. Therefore, it is paramount to record them correctly in your Accounting Software. This is particularly important when entertaining employees or buying gifts for them, as Fringe Benefit Tax may also apply.
When organising Business Christmas parties, or looking at buying gifts for clients or employees, the following factors should be taken into account:
- The cost per head
- Where and when the party is held
- Who is invited
(Employees, Associates, Clients)
- The recipient (Clients/Employees)
- The type of gift
- The gift amount (Employees)
Employers can also pay Christmas Bonuses to their employees. It is essential for employers to know that Christmas Bonuses are subject to both PAYG Tax and Superannuation. Therefore, employers should budget an additional 9.5% Superannuation to the cost of the Bonus.
It is also important to inform employees that the amount of the Bonus is gross and tax will be deducted from this payment. However, Bonus Payments are not taxed like standard wages, the tax calculation can be marginalised over 12 months. This method can substantially reduce the calculated tax on this annual lump sum.
Donations and Giveaways
During this time, some businesses feel inspired to donate money to charities. Occasionally, they may also involve their employees by introducing Workplace Giving Programs into their organisations.
We have created a range of comprehensive User Guides to help you understand the correct Tax and GST implications for these activities and set them up properly in your Accounting Software.
Want to understand the correct Tax and GST implications when purchasing clients’ or employees’ gifts and entertainment?
Want to learn how to tax Annual Bonuses?
Want to understand the correct Tax and GST implications when making donations?
Want to learn how to set up a Workplace Giving Program Pay Deduction?
This blog and attached resources are of general nature designed for informational and educational purposes only. They should not be construed as professional financial advice for your individual business. Should you need such advice, consult a licensed financial or tax advisor.