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Don’t let secret Santa catch you out at Christmas

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It’s the season to be merry but accountants, lawyers and debt experts warn it's the season to be wary with tax traps and cash traps and highly dependent staff all conspiring to make the New Year one that business owners might never forget.

In fact, there is evidence that calling a Christmas party ‘a Christmas party’ could be a mistake.

Lawyer Warwick Ryan from Central Coast Business Lawyers has given employers the “bah, humbug” that would have spooked Ebenezer Scrooge.

Christmas parties designed to bring good spirit to staff and customers historically have brought a lot more, according to court proceedings. Ryan lists drink-driving accidents, employees over-drinking and ending up in hospital, practical jokes that go wrong and punch-ups. But that's not the worst of it.

“There are Secret Santa or Kris Kringle gifts that are sexually explicit or racially offensive,” Ryan says. “Then there's illicit drug use.”

Employers can be responsible for the actions of their employees for the arrangement and duration of the party, and sometimes after the party is over, if it is found to be in connection with employment.

In the age of litigation and employees' rights, employer groups are beating the drum that Christmas get-togethers are a high-risk celebration for bosses.

As an employer it’s important to take reasonable steps to ensure everyone has a good time and stays safe, both at the party and on their way home afterwards.”

Being proactive for the after-party activities is the advice. Just as people going out often appoint a `designated driver', you should find people who are prepared to be the `designated managers' at their Christmas function.

As a business owner you want everyone to get home safe and sound at Christmas (or from any office function) and not in an emergency department or a lawyer's office.

The recommendations from the “party police” include serving food with alcohol, ensuring low-alcohol and non-alcoholic beverages are available and designating some managers to stay sober.

Make sure that you recognise and adhere to the responsible service of alcohol as it is crucial and also ensure appropriate transport, so employees get home safely. This is a minimum obligation. Friendly reminders should be sent to all employees before any party setting out the company's policies on harassment, alcohol and drugs.

Ryan makes some commonsense recommendations: when setting up decorations, make sure the equipment is safe to use and that the Christmas tree is not in a high-traffic area where people can trip over.

“Get cabs home or hire a mini-bus for people who are over the limit or who appear over the limit,” he says. “Remember, if an accident occurs and the employee is injured, then you as the employer could be open to a negligence or common law claim.”

Meanwhile, accountants remind us that Christmas parties constitute “entertainment benefits” and therefore fall into the fringe benefit tax dragnet. However, there are some avenues for FBT relief.

“Holding the Christmas party on your business premises is usually the most tax effective,” advises chartered accountant Joe Kaleb from Australian Biz. “Expenses such as food and drink are exempt from FBT for employees with no dollar limit, but no tax deduction or GST credit can be claimed.”

In true tax office traditions, it gets messier. Where employees' families -- they're called associates -- attend and the combined cost per head for the employees and associates is $100 or more inclusive of GST, there is FBT on the associate's portion of food and drink, and a tax deduction and GST credit can be claimed on that portion.

Unbelievably, the cost of clients attending the party are not subject to FBT, but no income tax deduction or GST credit can be claimed on their portion of the cost.

And if employers survive the party pressures, then there's a cash crisis tipped for the post-Christmas survivors.

“There is generally a heavy cash burden on small businesses, with Christmas pays and reduced output and billings/orders in the week leading up to Christmas,” says Roger Mendelson, CEO of debt recovery business Prushka.

He recommends trying to get bills paid before the festive period. 

Work on your business, not in it. To learn how, book a complimentary business assessment today with a Switzer Business Coach.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Published on: Friday, December 11, 2009

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