Summer 2024

Avoiding penalties on presents and parties

Christmas can be a tricky time when it comes to tax and there are lots of ways your business might land an unexpected tax bill.

The staff Christmas party isn’t the only potential tax trap, gifts for clients and employees should also be carefully considered.

If you decide to give your employees a Christmas present, the easiest way to avoid tax is to ensure the gift is less than $300 (inclusive of GST) and is classed as a minor benefit by the Australian Taxation Office (ATO).

If your gift meets all the criteria, the ATO will consider it exempt from Fringe Benefits Tax (FBT). Otherwise, the gift will be subject to FBT at the rate of 47 per cent.

To qualify for this exemption, the gift must be given on an infrequent or irregular basis – so no weekly lunches or multiple gift vouchers – and it must not be a reward for service.

Examples of minor benefit exemption non-entertainment gifts could include Christmas hampers, gift baskets, a department store gift card or voucher, skincare and beauty products, sealed bottles of alcohol and flowers.

If you decide it’s all too hard and give your employees a cash bonus instead, you will not have to pay FBT on the amount, but be aware that your employee will pay income tax on it.

Employee gifts that may attract tax

One of the best ways to avoiding tax problems when it comes to employee gifts is to skip any that are classed as entertainment by the ATO. That includes gifts like restaurant meals and tickets to movies or the theatre, sporting events or concerts.

Other gifts classed as entertainment include accommodation, travel and flights that are not for work and annual gym memberships. (These are classified as recreational entertainment.)

If entertainment-type gifts cost less than $300 (inclusive of GST) FBT is not payable, but you are unable to claim a tax deduction for the cost or claim the GST input credits.

Gifts to others

It’s worth remembering the FBT minor benefits exemption for gifts costing less than $300 also applies to any gifts provided to customers and associates (such as employees’ partners).

Entertainment gifts provided to clients over the holiday season are not subject to FBT, but there is no tax deduction allowed and the GST input credit cannot be claimed.

Although you may consider treating yourself (or a family member not involved in the business) to a Christmas gift, you can’t use the tax rules to do it. Private gifts are not tax deductible.

If you operate as a sole proprietor or a partner in a partnership, you can’t be your own employee, so you are not eligible for these employee benefits.

FBT and your Christmas party

If you plan to hold a work Christmas party for employees or clients, keep an eye on the tax rules so that you don’t find yourself facing a hefty tax bill.

You don’t pay FBT on the cost of the food and drink if your party is only for current employees and is held on a working day.

It’s a slightly different rule if the party is held off-site at say, a local club or restaurant. There’s no FBT if the party includes employees and their friends or partners, and the cost per person is under $300 and is considered a minor benefit. But FBT will apply if it costs more than $300 per person.

You don’t pay FBT for any costs relating to clients.

A tax deduction and GST credits can be claimed for the costs relating to employees and any family, but they cannot be claimed for the costs involved with any clients in attendance, as their benefit is not subject to FBT.

If you would like more information about the potential tax traps around Christmas, call our office today.

Tax update December 2024

GST focus remains, while community tip-offs increase

Fraudulent claims for GST refunds continue to be a major focus for the ATO, with several new pilot programs announced to help small businesses with GST reporting.

Here’s a roundup of the latest tax news.

New PAYG adjustment factor

Pay As You Go (PAYG) instalments – whether you pay quarterly or twice-yearly – has been increased to 6 per cent for 2024-2025 to reflect the latest GDP increase.

The change in the adjustment factor does not affect taxpayers who work out their own instalments or pay annually.

PAYG instalment amounts can be varied through the ATO’s Online services for business if you believe your current instalment amount will be more or less than your expected tax liability for the year.

Pilot programs to protect GST system

The ATO will be running a number of pilot programs during 2025 that aim to improve the digital tax experience for small businesses.

The pilot programs will encourage more frequent payment and reporting by small businesses and try to reduce complexity by embedding the tax rules and logic into small business software.

The ATO also hopes to empower small businesses by providing more information to help them get their GST right from the start, providing them with more time to focus on their business, rather than their tax obligations.

Community tip-offs increasing

The community appears increasingly willing to report tax cheats. The ATO received more than 47,000 tip-offs during 2023-24, with around 90 per cent deemed suitable for further investigation.

Building and construction, cafes and restaurants, and hairdressing and beauty services topped the list of industries reported.

Common tip-offs include taxpayers not declaring income, demanding cash from customers, paying workers in cash to avoid paying tax and super, not reporting sales, and where someone’s lifestyle did not appear to match their income.

Obligations for festive season employees

Hiring new employees to help out during the festive season brings with it the same tax and super obligations as for regular employees.

The ATO is reminding employers to ensure they withhold the right amount of tax from any payments made and also to pay all eligible employees’ super funds the correct amount of Super Guarantee to avoid paying the Super Guarantee Charge.

Employers without an approved exemption, deferral or concession must lodge the necessary information for new employees through the Single Touch Payroll system from their first payday.

GST fraudster imprisoned

Stamping out GST fraud continues to be a priority for the ATO, with a Victorian woman sentenced to four years imprisonment after claiming nearly $600,000 in GST refunds from 27 fraudulent business activity statements.

She is also being pursued for the amount she fraudulently obtained by submitting the multiple false claims for a fake cleaning business.

The case is part of the ongoing ATO-led Operation Protego, which was set up in response to numerous cases of attempted GST fraud. So far 104 people have been arrested and 59 convicted.

Eligibility for small business litigation funding

If you have a dispute with the ATO being heard by the Administrative Review Tribunal, you may be eligible for litigation funding to cover “reasonable” legal expenses.

To qualify, you must be a small business (sole trader, partnership, company or trust) operating a business for all or part of the relevant income year and have a turnover under $10 million.

Funding is available only if the matter does not involve a tax avoidance scheme, fraud or cash economy issues. You must not have a history of failing to lodge tax returns.

Updating your ABN details

The ATO is reminding taxpayers holding an Australian Business Number (ABN) they need to regularly ensure their current contact details are correct so they don’t miss out on important help, information, or support like financial grants.

Check both your physical business address and postal address are listed on the Australian Business Register, together with your authorised contacts, contact details and business activities.

From hands-on to hands-off: tips for a self-sustaining business

Owning and running a small business can often feel like juggling flaming torches, while riding a unicycle on a high wire—you’re constantly managing multiple tasks, with each one demanding your attention essential to the running of the business. There is no room for dropped balls (or dropped flaming torches!) and it’s common to be one person doing the jobs of many. So how do you get some sanity in your life and still manage to have a thriving business?

Managing to decouple yourself from the running of the business can be challenging but has so many advantages. If you are freed up from the day-to-day you can be able to add maximum value to the business (and enjoy maximum flexibility and fun), your team have room to shine, all while adding to the value of your business and making room for growth.

Here are a few tips to help make some changes to move towards a self-sustaining business.

Let it go!

One of the most effective ways to transition your business to run independently is by embracing delegation. This can be the hardest part for many business owners as the business is their ‘baby’ and relinquishing control can be daunting.

Start by listing all the tasks and responsibilities you currently handle. Categorise them into three groups: tasks you can delegate, tasks you should delegate, and tasks only you can handle. Train your team on the tasks you plan to delegate, and make sure to empower them – providing them with the tools and authority needed to succeed.

Encourage others to step in

Building a capable and motivated team is crucial for a self-sustaining business. When your team feels empowered and trusted, they’re more likely to take ownership of their roles and contribute to the business’s success.

Focus on hiring individuals who not only possess the necessary skills but also share your vision and values. Encourage staff to take initiative and make decisions within their scope of responsibility. Recognise and reward their efforts and be patient and supportive as your team adjusts to their new responsibilities.

Decouple yourself by having processes in place

If you want people to step in, you’ll also need to look at how you can make things run more efficiently and easily without you involved. Standard Operating Procedures (SOPs) are vital for ensuring consistency and efficiency in your business operations. By documenting your processes, you provide a clear roadmap for your team to follow, reducing the need for your direct involvement in every task.

Begin by documenting the most critical and frequently performed tasks. Include step-by-step instructions, necessary resources, and common troubleshooting tips. Regularly review and update these procedures to keep them relevant and accurate and encourage your team to provide feedback to make continuous improvements.

Leverage technology and automation to free up time

In today’s digital age, technology can be a powerful ally in making your business run smoothly. Automation tools can handle repetitive tasks, streamline processes, and free up time for more strategic activities.

Invest in software solutions that align with your business needs. For instance, customer relationship management (CRM) systems can automate customer interactions and track sales leads, while accounting software can simplify bookkeeping tasks. Explore options for automating marketing campaigns, inventory management, and even communication tools such as project management software or team collaboration platforms to facilitate information sharing and coordination.

Prioritise your well-being

Stepping back from day-to-day operations can be challenging, especially when it involves relinquishing control. However, prioritising your own well-being is essential for both your health and the long-term success of your business.

Make self-care a priority by setting boundaries and creating a balanced work-life schedule. Engage in activities that help you relax and recharge, whether it’s pursuing hobbies, spending time with loved ones, or simply taking time for yourself.

Transforming your small business to run independently is a journey that requires thoughtful planning and a willingness to adapt. While it can be difficult to step back, the benefits for both your business and your personal well-being are well worth the effort. Embrace the change with confidence, and enjoy the freedom that comes with a thriving, self-sufficient business. Your future self—and your business—will thank you.

Recharging for Success

As a small business owner, you may find it difficult to justify taking time off. After all, your business demands your attention, and you worry what will happen if you step away for a break. However, taking a break from the business can be one of the best decisions you make for your business.

In fact, regular vacations can lead to significant benefits, including process improvement and automation, while also rejuvenating your spirit. Let’s explore how taking time off can be a game changer for you and your business.

Operating at your peak

If you are dragging your heels the impact on your business is profound. Constantly working without breaks can lead to fatigue, irritability, and impact your motivation and productivity.  Taking regular time off helps to maintain your mental and physical health, ensuring you return to your business refreshed and ready to tackle challenges with renewed vigour.

Charge your creative batteries

When you’re immersed in your work, it can be challenging to think outside the box. A change of scenery—whether it’s a beach, mountain retreat, or a new city—can spark new ideas and perspectives. Many entrepreneurs report that their best insights come during moments of relaxation when their minds are free from the pressures of daily operations. By taking time off, you allow yourself the mental space to brainstorm innovative solutions and strategies that can drive your business forward.

Regular breaks can enhance your decision-making abilities. A fresh mindset can help you see the bigger picture and prioritise what truly matters for your business’s growth. This clarity can help you identify potential pitfalls and opportunities that you might have missed while entrenched in day-to-day operations.

Strengthening your team’s contribution

When you take a vacation, it’s not just beneficial for you; it can also strengthen your team. Delegating responsibilities while you’re away empowers your employees, helping them to develop their skills and confidence. It shows that you trust them to handle tasks without your constant oversight. Upon your return, you may find that your team has grown stronger and more cohesive, which can enhance overall productivity. Additionally, allowing your team to see you prioritise work-life balance encourages them to do the same, leading to a healthier workplace culture.

Automate your processes

Planning for a break can give you a reason to consider how automation can improve your business processes. Many small business owners find themselves overwhelmed by repetitive tasks that can easily be automated. As you plan to take some time out, take the opportunity to research tools and technologies that can streamline operations.

For example, investigate customer relationship management (CRM) software to manage client interactions, or explore project management tools to keep your team organised. When you return these solutions can remain in place to save you time and increase your efficiency.

Tips for a stress-free vacation

While the benefits of taking a vacation are clear, the thought of planning one can be daunting. Here are some practical tips to ensure your time off is stress-free:

Communicate clearly: Inform your clients and colleagues about your absence in advance. Setting up an out-of-office message can help manage expectations and redirect urgent inquiries to your team. 

Delegate wisely: Identify team members who can handle various responsibilities while you’re away. Provide them with the authority to make decisions and access to necessary resources. Trust is key here!

Unplug and unwind: Resist the urge to check emails or take business calls during your vacation or arrange specific time you are available if needed. Create boundaries so you can fully enjoy your time off.

Reflect and recharge: Use your vacation not just for leisure but also for reflection. Consider what’s working in your business and what changes you’d like to make when you return.

Vacations are not just an indulgence; they can be a crucial component of sustainable business success. From enhancing creativity to preventing burnout and improving decision-making, the benefits of taking time off extend far beyond personal relaxation. So go ahead—book that trip, recharge your batteries, and return ready to lead with renewed energy and vision.

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