However employers can also get into a jolly mess during this season.
It’s wise to remember:
- that the location of your Christmas party is considered part of your work place.
- the behaviour of staff continues to be measured against your normal work standards.
- being underthe influence of Alcohol or drugs is not an excuse for bad behaviour, nor is the style of clothing or lack thereof worn by work mates.
- a person needs to be appointed to act as guardian to handle poor behaviour or to get those under the influence home safely.
- you should have a written policy in respect of alcohol and drugs, and improper behaviour at the work place including work celebrations.
- if you have a policy then you need to ensure that it is followed. Not following your policy is worse than not having one.
There was one case where a chandelier fell onto a bed occupied by two staff at a conference. On appeal the court said this was not a work activity. This appeal succeeded because of the human interest in the story but employers are warned that will be considered an aberration and employers need to consider this type of behaviour at a conference as a work activity.
Mixing drinks will give you a headache. Mixing tax and entertainment will give an even bigger headache.
Working out the rules of entertainment is the most complex part of tax.
First GST. GST cannot be claimed back on money spent that is deemed not tax deductible. You thus need two codes in your chart of accounts; 1) entertainment deductible, GST can be claimed, and 2) entertainment not deductible and GST cannot be claimed.
Entertainment which is defined as the provision of food and drink is not deductible.
Now for the exceptions:
- If the food and drink is part of a travel expense
- If the food is provided in an in-house dining facility
- If it forms part of the fringe benefit provided to employees but you then have to pay fringe benefits tax
- If provided to the public for promotional or advertising purposes eg on opening night
- If it is the provision of morning and afternoon teas and light lunches provided to employees
- If the employee is in the entertainment or accommodation industry
- If the meal is provided at a seminar lasting at least 4 hours
- If it is an overtime meal provided under an industrial instrument
When entertainment is provided to employees of a tax exempt body FBT applies even if the body is normally exempt from FBT
And now for the Christmas party.
If the benefit is minor, that is less than $300 per employee and is infrequent and irregular then it is an exempt Fringe Benefit. Luckily Christmas happens only once per year and thus must be infrequent and irregular in any year.
And what about if you invite a client to the party? You have to split the cost between employees and guests. You also need to separate if any of the guests or employees have travelled to the function but not local travel, as then it would be a travel expense
If you are a politician or union official then be careful which credit card you put it on!
If this is all too much for you then have an extra drink, get a taxi home and when you are sober come and get us to work it all out for you.