The first internal affairs went poo on your Melbourne Cup Day party with its raffle rules, now Inland Revenue is considering your staff’s Christmas bonus.
While you set up the office Christmas tree, make some noise with last year’s garlands, and impose Christmas cupcakes on everyone else, keep the tax department on your mind or regrets may follow you into the new year.
According to consulting firm Deloitte, Christmas benefits for employees generally fall into three tax categories: entertainment, employee benefits tax (FBT) or PAYE (pay as you earn).
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Christmas party outside the office
Expenses for room rental, food and drink, as well as other costs such as the rental of dishes, glassware, waiters and a band, fall into the punch bowl of the tax. entertainment.
Employers can only deduct 50 percent of these expenses, say Amy Sexton and Anna Zhang of Deloitte.
An employee gift basket
Keep the cup? To verify. Nice scarf? To verify. Chocolates and bubbles? To verify. Social benefits tax? As a general rule, check. This is because employees can enjoy these benefits at their discretion, explains Deloitte.
There are, however, some exceptions.
Accounting firm BDO claims that a de minimis exemption allows staff gifts without FBT if the total assessed value for a single employee is less than $ 300 per quarter (if paid quarterly), or $ 1,200 per year ( if paid annually), and the value for all employees is less than $ 22,500.
Christmas cash bonus
Staff cash bonuses are taxable as part of the PAYE, as a payment related to their employment and not as a regular payment included in the employee’s wages and salaries.
Some employers are giving staff vouchers, so they can support local businesses that have been affected by the Covid-19 lockdowns.
If an employee can use their voucher for anything they want, the cost of the voucher falls under the benefits tax.
A gift for customers and suppliers
Food and drink gift baskets for customers who have shown their support during a difficult year will only be deductible at 50 percent under the entertainment plan, according to Deloitte.
Adding a scented candle and a fancy cheese and wine tea towel means that the expense must be split between a fully deductible deductible (inedible or drinkable items) and a 50% deductible.
‘Dine on us’
Telling employees to afford dinner at a restaurant and claim it through expenses is called “employee expense”.
Once your employee provides a receipt, you need to add the full amount of the taxable benefit to their salary or wages, with PAYE then deducted from the total gross amount, explains Deloitte.
Child support, student loan deductions and KiwiSaver are all assessed on the employee’s gross income, which includes taxable benefits. The expense will be 100 percent deductible for the business.
Road trip in a company car
Summer vacation means summer road trips, keeping New Zealand’s Covid-19 restrictions in mind.
Some employees may use their company car to drive to the beach, and employers should remember that the benefits tax will apply whenever a company vehicle is available for an employee to use. private use.
What tax regime covers what?
Entertainment covers benefits that have both a private benefit and a business benefit, explains Deloitte. This includes recreational events outside of business premises, in some cases including food and beverages, outside of employment functions.
Employee benefit tax covers non-monetary benefits provided to employees, which may be enjoyed at the discretion of the employee and which are unrelated to their employment.
PAYE covers costs incurred by employees that are reimbursed by their employers or funded by an allowance.