This month, we explore the top Christmas problem areas:

GETTING BEYOND MERRY: PARTIES AND ALCOHOL

An employee has a few drinks before the work Christmas party, is served and helps himself freely to alcohol during the party, and then retires to a public bar with a few colleagues. This scenario sounds normal for many work Christmas parties. But, in his wake, this employee apparently told a Director to “F… off, mate” later advising that, “All those Board members and managers are f….., they can all get f….”, and was involved in five separate incidents involving female colleagues, telling one “I’m going to go home and dream about you tonight”, and another that, “My mission tonight is to find out what colour knickers you have on”.

The employee in question was a Team Leader and ironically one of two elected employee Work Health and Safety Representatives. He had been through an induction process when he joined the company on its policies, and his employment contract stated that breaches of company policy may be grounds for dismissal. So, the company believed that, when the full picture of what occurred that night emerged, they were within their rights to dismiss him.

The employee however successfully claimed unfair dismissal. The Fair Work Commission found that, among other things:
•    No manager was tasked with supervising the overall running of the Christmas function or the conduct of staff – the company relied on hotel management.
•    Some of the events, including sexual harassment happened at the after party and were not sufficiently connected to work.  ‘Out of hours’ conduct can be a cause for dismissal but in limited circumstances.
•    There were alternative actions to dismissal that the company could have taken.
•    There were issues with procedural fairness in how the company managed the investigation and employee meetings following the Christmas party incidents.

It’s important that employers hosting work Christmas parties ensure that where alcohol is being served, they have taken steps to make sure that the event remains in the spirit of the season, such as: making employees aware of the company policies and expectations of behaviour during the party (including the consequences of breaching policy); make sure someone at managerial level or above is responsible for managing conduct during the party (and the responsible manager is sober!); ensure that the function has start and end times; and team members have a way of getting home safely.

BINGING ON CHRISTMAS EXPENSES

It’s easy to spend too much at Christmas. If you are splurging on clients, to be a legitimate business expense and therefore deductible, the expense has to be related to how your business generates income. So, excessive expenses may draw the attention of the regulators and the deduction denied.

If you are hosting client functions, inviting them to lunch, or to your Christmas party, entertainment costs are not deductible.

For staff, if you really want to avoid tax on your work Christmas party then host it in the office on a work day – that way, it’s likely to be exempt from Fringe Benefits Tax (FBT) regardless of what you spend per person.

But, if you are hosting a work Christmas party outside of the office, keep expenses under $300 (GST incl.) per employee to stay under the FBT minor benefit exemption threshold. So, post Christmas party taxi travel expenses, the cost of the Christmas party itself (including meals, drinks and entertainment etc.,) will all be exempt from FBT as long as the cost is kept below $300 per employee.  But, employers cannot then claim a deduction for the Christmas expenses or claim GST credits.

Christmas gifts for the team should also be kept to under $300 (GST incl.) to ensure they do not incur FBT. Employers can claim a deduction for ad hoc Christmas gifts as long as they do not relate to entertainment.

POST CHRISTMAS REGRETS

February is when a lot of businesses pay their Activity Statements. Avoid Christmas cashflow hangovers. Make sure you protect your position and stay on top of not just Christmas expenses but debtors, stock, and staffing costs.

The material and contents provided in this publication are informative in nature only.  It is not intended to be advice and you should not act specifically on the basis of this information alone.  If expert assistance is required, professional advice should be obtained.

Related Posts
The Arabon group includes Arabon Accountants (ABN 67 090 816 208), Arabon Audit & Assurance Pty Ltd (ABN 84 606 320 772), Arabon Financial Services (ABN 18 742 039 766) and Arabon Care (ABN 62 620 837 952). Arabon Financial Services is a corporate authorised representative of Arabon Financial Pty Ltd (ACN 165 828 142 AFSL 446 878).