Christmas Related Matters

Christmas Bonus Payments

Employees are often paid a bonus around Christmas time. Generally, the bonus is paid for performance over the past year – in this case, when it is classified as a ‘one-off bonus’, it is taxed only in the current financial year.

If the business is paying a bonus for a defined period of less than 12 months, there is a choice to calculate the required PAYG withholding by using the number of pay periods the payment relates to. For example, a Christmas bonus would be taxed over the first 6 months of the current financial year, rather than the full financial year.

*Refer to ATO Schedule 5 – Tax table for back payments, commissions, bonuses and similar payments

Superannuation guarantee (SG) is payable on all bonus payments, the exception being that if a bonus relates to overtime – only then is SG not payable.

Salary Sacrifice of Bonus Payments

A bonus payment may only be sacrificed to superannuation if such an arrangement already exists in writing before the bonus payment is made or notified to the employee. If the arrangement does not exist before the bonus, it must be paid as wages – it cannot be sacrificed.

Christmas Gifts for your Employees

Are gifts to employees claimable as a business expense?

The provision of a gift to an employee (such as a hamper of goodies) may be a minor benefit that is an exempt benefit for FBT where the value is less than $300. If the gift is given at the party, each benefit – the gift and the food per head – are considered separately.

• Note: A minor benefit is a gift of less than $300 (GST inclusive) and provided infrequently.

For gifts such as wine, food, hampers, vouchers, etc., these are not considered to be entertainment.

1. 1. • If the gift is a minor benefit (i.e. less than $300 value), then the gift is not tax-deductible, therefore GST is not claimable for gifts to employees and their family members.
        No FBT applies to gifts of less than $300.
      • For gifts over $300, FBT may apply for employees and their family members, and it is tax-deductible.

Gifts such as a holiday, membership to a club, or tickets to a theatre, sporting, or musical event are considered to be entertainment.

• • • For minor benefits under $300, the gift is not tax-deductible, and no FBT applies.
    • For employees given a gift over $300, the gift is tax-deductible, but it is also subject to FBT.

Christmas Gifts for your Clients and Suppliers

Are gifts to your clients and suppliers claimable?

Gifts may be classified as ‘entertainment’ or ‘non-entertainment’, and FBT is not relevant to clients and suppliers.

For gifts such as wine, food, hampers, vouchers, etc., these are not considered to be entertainment.

1. 1. • Non-entertainment gifts to clients or suppliers are deductible, and GST is claimable.
        No FBT applies.

Gifts such as a holiday, membership to a club, or tickets to a theatre, sporting, or musical event are considered to be entertainment.

1. 1. • For clients and suppliers, the entertainment gift is not tax deductible, and no GST is claimable.

Giving your business clients a gift at Christmas is a personal choice that the business owner can make. Be aware that some clients may not be allowed to accept gifts due to their business’s Code of Conduct (e.g. government workers).

We reiterate, the topic of entertainment, tax deductibility and fringe benefits tax is complex and not always straightforward, and may require the guidance of the Tax Agent.

Annual Shut Downs

Many businesses have a scheduled period of closing business operations during the Christmas and New Year period. How an employer must treat this depends on the award or agreement the employee is governed by. These guidelines apply to permanent employees – casual employees do not have to be paid during a scheduled shut down.

If the award or agreement provides for the employer to direct leave to be taken at specific times, then the employer can do this so long as they follow the guidelines – including how much notice is required.

What if the employee doesn’t have enough leave?

The employer can agree to pay annual leave in advance, or the employee can take unpaid leave. However, from Fair Work: “If an employee doesn’t agree to either, unless the award/agreement states differently the employees must be paid their ordinary pay rate for the shutdown. They cannot be forced to take unpaid leave.”

If the award or agreement is silent on the issue, then the employer may not force an employee to use their leave during a scheduled closure. The employer can negotiate with the employee to take paid or unpaid leave, or half pay leave if the award/agreement allows this.

Public Holidays During Leave

Public holidays that fall during a period of paid leave are always paid as normal work days; they should not be taken as annual leave days. If an employee usually works a given number of ordinary hours and overtime hours, then they will be paid only for the ordinary hours on a public holiday – they will not be paid for the usual overtime hours. If a public holiday falls during a period of agreed unpaid leave, the public holiday is not required to be paid.

Public Holidays

Public holidays form part of the National Employment Standards (NES) that every employer is bound by. In addition to the NES, employees are governed by an award or registered agreement or another legal instrument. The NES allows an employee to be absent from work on a public holiday and to be paid for it. An employer may reasonably request an employee to work on the public holiday, but the employee has a right to refuse the request.

Public Holidays Worked

If the employee works on a public holiday, they should be paid public holiday penalty rates or provided with an acceptable alternative. Awards and agreements differ in the treatment of working on public holidays. Some awards state that a worked public holiday must be paid accordingly. Others allow for substitution of another day off in lieu of the public holiday.

An employer may not coerce an employee into substituting a day in lieu if the employee wishes to be paid penalty rates. If an employee normally works overtime on a day of the week that a public holiday falls on, the employee is only due to be paid ordinary hours for that day. They would not be due to be paid the overtime they have missed out on.

Public Holidays Worked Interstate

If an employee is required to work interstate on a day that would be a public holiday in their usual state of employment, this must be recognised as a worked public holiday, even if the state being visited is not observing the same public holiday.

Asking an Employee to Work on a Public Holiday

Can you ask an employee to work on a public holiday?

An employer may request for an employee to work on a public holiday if it ‘reasonable’, and an employee may refuse a request if it is ‘reasonable’ according to Fair Work.

Factors to consider:

• • • The nature of the employer’s business and operations.
    • The nature of the work performed by the employee and the basis of employment.
    • The employee’s personal circumstances and family responsibilities.
    • The amount of notice given to the employee in requesting them to work the public holiday and/or the notice given by the employee of refusal to work.
    • Any agreements in place that reflect an expectation of working on public holidays.
    • Costs to the business and negative impacts on efficiency.
    • Productivity and customer service.
    • Capability of other existing staff.
    • General practicality of accommodating the request.

Not Working on Public Holidays

With the exception of casual employees, employees that would normally work on the specific day that the public holiday has occurred are to be paid their usual base rate in conjunction with their ordinary hours that they would have worked.

The base rate does not include:

1. 1. • Penalty rates.
      • Loadings.
      • Overtime.
      • Monetary allowances.
      • Bonuses or any incentive-based payments.

• Note: It is unacceptable to change an employee’s day of work to avoid making this payment.

Paydays on Public Holidays

You will need to consult the relevant award to see if there is particular provision for this scenario.

In most cases, if payday falls on a public holiday, then payment can be made on the next business day. The Fair Work Act is silent on this issue. If the day the employee will receive the wages is going to be later than usual, best practice is to notify the employees in writing well in advance.

© The Institute of Certified Bookkeepers