While a cash bonus may be welcomed, PAYE will need to be returned and it is important to bear in mind it can affect an employee’s entitlements to working for families’ tax credits, student loan repayments, and other social assistance.
A Christmas party for staff will be subject to the entertainment rules for tax purposes, meaning you will only be able to claim a 50% tax deduction for the costs of throwing the party. The same rule applies for any after works drinks.
Gifts of food and drink to customers are only 50% deductible. However, other types of gifts such as vouchers or soaps are 100% deductible.
A Christmas gift to your staff of wine or ham will be 100% deductible, but may attract fringe benefit tax (FBT) as an unclassified benefit if certain de minimis thresholds are exceeded. For quarterly FBT filers the de minimis threshold for all unclassified benefits provided to an employee is:
- $300 or less for the employee per quarter; and
- $22,500 for all employees in the current quarter and three preceding quarters.
As you can see from this brief overview there are definitely things you should consider before getting too carried away with festive cheer. For more information we recommend talking to one of our tax advisors – we’re here to help.