Australian businesses should avoid paying extra fringe benefits tax during the Christmas season by practicing some clever accounting strategies, an industry expert has said.
But employers have also been warned to be on the lookout for potential sexual harassment incidents during Christmas parties, where employees may act inappropriately under the influence of alcohol.
Jol Dare, tax manager at accountancy firm HLB Mann Judd has said business owners and managers will save themselves time and money if they determine the cost of functions and gifts can remain with the fringe benefits tax threshold.
“The best tactic is to keep it simple by ensuring each ‘benefit’ provided to employees is under $300 so they qualify as minor benefits, which means they fall below the FBT threshold,” Dare said in a statement.
“While the requirements around reporting FBT are still fairly complicated, as long as the threshold isn’t exceeded, it should be much easier than in the past.”
Dare says there are a variety of techniques employers can use in order to keep fringe benefits tax claims uncomplicated.
Firstly, he says to split benefits for employees between gifts and meals. For example, an employer who spends $400 per head on a Christmas party would do better to split the gift between a $200 gift, and $200 meal.
“The first $400 is not minor benefit and as a result FBT has to be paid on the full amount. But the “split” arrangement allows two separate minor benefits that each fall within the FBT threshold of $300 and so avoids the FBT hangover,” he said.
Similarly, Dare says employees should account for entertainment, meals, gifts and recreation expenditures separately as Christmas periods often have many activities which would otherwise add up over $300.
Keeping records of who attends each function can allow companies to save money, known as the “specific identification” method.
“It has the advantage of allowing minor benefits to be excluded from FBT calculations. The outcome for a business is often more advantageous than the more common 50/50 split method but if not, the 50/50 can still be elected for events during the FBT year,” he says.
And if you have the Christmas spirit, Jare says businesses can now offer gifts to employees without fearing an extra tax on their heads.
“Once upon a time the Tax Office took the view that gifts provided at the Christmas party had to be included when considering the minor benefit threshold. This resulted in scrupulous employers avoiding simultaneous gifts and party in order to avoid paying FBT.”
“Scrooge has since left the building – the Tax Office now views a gift provided at the party as separate for testing the “minor” threshold.”
But while Dare says companies have opportunities to avoid paying mountains of tax, employers shouldn’t go over-the-top.
“Perks need to be minor, and also infrequent, irregular and not as a direct reward for services. A $200 gift and party a year is fine, but if it’s every quarter, it’s likely to draw the attention of the Tax Office,” he says.
Meanwhile, employers are being warned to watch out at Christmas parties and functions for a potential rise in sexual harassment and bullying activity.
The Resolution Centre’s managing director Katherine Graham said there is usually a rise in claims regarding sexual harassment during the Christmas and New Year season, and that employers should “remain vigilant”.
“When putting on Christmas parties, some companies are aware of the legislation and their legal responsibilities when it comes to sexual harassment and bullying, but it’s important to be proactive in averting any potential claims,”
“For example, companies should be communicating clearly to staff the appropriate standards of behavior during work functions, preferably via written communication.”
Graham said there are a number of businesses which still lack clear policies for code of conduct, handling complaints and methods for disciplining staff who breach the codes.
“Businesses need to understand legislation and have in place office guidelines that set out acceptable behavior and work practices,” she said.
“There are still many businesses that don’t have these human resources structures, so conflict happens and conflict escalates, and by the time we’re asked to come in and mediate, the proverbial has already hit the fan with the conflict rippling throughout the entire company, affecting morale and the business’s reputation.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
