Claiming Christmas expenses

The Christmas run-up can be frantic for small business owners.
It’s important to think about business basics like paying taxes and staff over the festive season.

Staff parties

Throwing a staff party can be a great way to see out the year and celebrate successes, but there are tax considerations to think about.
You can claim some costs of a party or staff gifts, but they may be subject to fringe benefit tax. This is paid on benefits workers get as a result of their employment.
Half your holiday party expenses may be claimed in your GST and income tax returns if the expenses relate to your business.

Expenses can include:

  • food and drink
  • Venue hire
  • entertainment
Business Gifts and Entertainment

Generally, you can claim the costs of gifts as a business expense, eg hampers or gift vouchers. But you may need to pay fringe benefit tax on these gifts.
A meal out provided by the business is an entertainment expense and you can claim 50% as a business expense.

Giving to charity

You can deduct 100% of the cost of entertainment you provide to members of the public for charitable purposes. For example, if your business donates food to a party at a hospital.

Paying staff over the holidays

When there’s a public holiday on a day your employee usually works, they’re entitled to a paid day off — no matter how long they’ve worked for you.
You can only require employees to work a public holiday if it’s written in their employment agreements. Also, if they agree to work, you must:

  • pay them at least time and a half 
  • give them another paid day off later.

When a public holiday falls on a Saturday or Sunday, employees who don’t normally work then get the following Monday as their paid public holiday — this is called Mondayisation.

The public holidays for the upcoming Christmas break, are as follows:

Christmas Day — Friday 25 December 2020
Boxing Day — Saturday 26 December 2020
New Year’s Day — Friday 1 January 2021
Day after New Year’s Day — Saturday 2 January 2021

Any employee can ask to transfer a public holiday to another day.
You must consider requests unless you have a policy that prevents transferring public holidays.

Days in lieu

An employee is entitled to a full day off in lieu of working a public holiday — no matter how many hours they worked that day.
But they don’t get a day in lieu if:

  • they only ever work public holidays
  • they wouldn’t normally have worked that day they were on call but didn’t work, and being on call didn’t stop them doing what they wanted to with their day.