Unwrap Tax Savings: A Christmas Handbook for Business Owners

Posted on 30/11/2023

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With Christmas fast approaching, rewarding team members for their efforts throughout the year may be on the minds of many business owners. There are some key tax considerations to avoid an unwanted surprise come tax time. Read our key points below.

Annual Leave

To reduce the risk of team members moving on and leaving you with a large leave payout throughout the year, it is important to keep a close eye on annual leave balances accrued. Having a mandatory shutdown over the Christmas break can be a beneficial way of keeping annual leave balances in check, whilst giving your team a well-deserved break. A refreshed team and balanced annual leave in the new year is a winning formula on many levels.

Gifting your team this Christmas?

Thinking of rewarding your team’s stellar performance with gifts this season? The good news is that non-entertainment gifts are fully tax-deductible. Just keep them under $300 per head, and you’ll avoid the Fringe Benefits Tax under the ‘minor benefits’ exemption. Popular gifts to avoid the entertainment classification include hampers, flowers, and gift cards.

The Christmas Party Without the Tax Worry!

The minor benefits exemption extends its reach to cover the work Christmas party as well. However, it’s important to recognise that for FBT purposes, the Christmas party is treated separately from gifts. So, if you’re in a particularly generous mood this year, you can host a party and give gifts without triggering FBT, as long as each benefit remains under $300 per head.

Even if the Christmas party expenses skyrocket, there’s still a chance for an FBT exemption under certain conditions:

  • The party is held at your workplace during the working week, and;
  • Only staff members are in attendance.

In case team member ‘associates’ like family members plan to join the celebration, it’s advisable to cap the cost at $300 per head to steer clear of an unwelcome FBT bill.

It’s important to keep in mind that, apart from non-entertainment gifts, benefits are typically not eligible for tax deductions to the same extent as they are exempt from FBT. Additionally, GST credits cannot be claimed on these purchases.

Christmas Cash Bonuses

A Christmas cash bonus can be a great way of rewarding your team and boosting morale. If it has been a profitable year and the accounts permit, passing on a portion of this to the team will be a welcome gesture to close out the calendar year. But be aware – cash bonuses are seen as service rewards, triggering PAYG withholding and super obligations, in the same way salary and wages are.

ATO’s Gift to You: Quarterly BAS Extension

The ATO gives you a generous extension on the due date of the December quarter business activity statement to 28 February. If you would like to reward your team but are concerned about how you can afford gifts/bonuses, the extension will hopefully help ease any short-term cash-flow pressure over the Christmas break.

It is important to note however, that super obligations are still due 28 January, and the extension is unfortunately not offered to monthly lodgements.

The Christmas period is a time to reflect on the year’s achievements. Keeping staff morale high by offering your team some perks at this time of year can really motivate them for another strong year. Keeping the above considerations in mind this festive season will help to avoid an unexpected tax bill when the time comes.

To listen to our podcast on tax savings at Christmas, click here 

Speak to one of our Tax Advisory Directors.

Neil Oakes

Neil Oakes

Providing tax consulting advice to small, medium and large enterprises, with specific focus in the aged-care and property industries.

Brian Nimmo

Brian Nimmo

Brian specialises in providing high level taxation advice. Tax consulting across corporate tax, capital gains tax and international tax, to ATO product and class rulings for managed investment schemes.

Lee Jurga

Lee Jurga

Known for his attention to detail and technical acumen, Lee excels in simplifying complex tax matters and focusing on practical outcomes.

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