Christ­mas re­wards not a tax hol­i­day

Matamata Chronicle - - Out&about - CO­RAL PHILLIPS

Christ­mas can be a time to show some ex­tra ap­pre­ci­a­tion to your staff for their hard work.

Things have been pretty hec­tic on the farm over the last few months. Calv­ing, mat­ing, crop­ping, silage making all stretch the re­sources to the max. Christ­mas can be a time to show some ex­tra ap­pre­ci­a­tion to your staff for their hard work.

There are many ways to re­ward your employees and know­ing the tax im­pli­ca­tions may help you de­cide what ben­e­fits you give.

Re­wards such as pay­ing a bonus, giv­ing gifts or vouch­ers, or putting on a Christ­mas func­tion are all treated quite dif­fer­ently for tax pur­poses.

If you put on a Christ­mas func­tion for your staff and fam­i­lies, whether a bar­be­cue at your own property, or din­ner at a restau­rant, you are able to claim 50 per cent as a tax de­ductible ex­pense.

If the func­tion is a spe­cial morn­ing or af­ter­noon tea dur­ing work time, the cost of this will be 100 per cent de­ductible.

Giv­ing gift bas­kets or hams to employees is also com­mon prac­tice. Th­ese are gen­er­ally 100 per cent de­ductible.

Just note that over cer­tain thresh­olds Fringe Ben­e­fit Tax (FBT) may be payable. For ex­am­ple, employees gifts ex­ceed­ing $300 each per quar­ter may deem the em­ployer be li­able for FBT.

Vouch­ers given to staff are also gen­er­ally 100 per cent in­come tax de­ductible and the same thresh­olds for FBT will ap­ply as for other gifts.

How­ever, GST

will

of­ten

not

be claimable as it is un­likely you will be is­sued with a tax in­voice.

A cash bonus to an em­ployee must be taxed as re­mu­ner­a­tion and PAYE is payable. So when offering the cash bonus, you need to be spe­cific as to whether the amount is gross or net to avoid mis­un­der­stand­ings.

This cash bonus will also af­fect the employees claim for Work­ing for Fam­i­lies, Child Sup­port pay­ments and Stu­dent Loan re­pay­ments.

So the em­ployee may pre­fer to re­ceive a gift, than a bonus.

If the bonus is payable at the em­ploy­ers dis­cre­tion, it is un­likely to be in­cluded in the cal­cu­la­tion for an­nual hol­i­day pay.

How­ever, if it is linked to pro­duc­tiv­ity, or re­ferred to in the em­ploy­ment con­tract it will be used for an­nual hol­i­day pay cal­cu­la­tions.

In sum­mary, keep­ing within the gift thresh­olds will avoid FBT – with a cash bonus, you must deduct PAYE.

A gift voucher is 100 per cent tax de­ductible but gen­er­ally you can­not claim GST.

A phys­i­cal gift is 100 per cent tax de­ductible and you can claim the GST.

We ad­vise you to talk with us be­fore making any de­ci­sions on re­ward­ing employees, as the rules are com­plex.

Co­ral Phillips is an as­so­ciate at Coop­erAitken Ltd Ac­coun­tants, Mor­rinsville, Mata­mata and Thames, DDI 07 889 8822 or email co­ral@coop­eraitken.co.nz.

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