Tax efficient gift giving
Tax effective gift giving might not be at the top of everyone’s mind but hey, we’re accountants and we can’t help it. So, for all those non-accountants, here are our top tips for giving to those you intend (and not the tax office):
Giving to your team
Christmas celebrations at your work on a working day are likely to be exempt from FBT.
Keep the cost of your celebrations per person below $300 to make sure the event is a minor benefit for FBT purposes and exempt from FBT (including meals, beverages, entertainment, etc.,).
Keep any Christmas presents below $300 per person and ensure they are ‘one-off’ gifts. They need to be ad hoc to be exempt from FBT.
You can’t deduct the cost of your Christmas celebrations for team members unless FBT applies.
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Ho Ho Humbug: The business realities of managing the Christmas season
The Christmas season affects different businesses in different ways and can have a significant impact on you.
For some, it is boom times but for others, a period of significant dislocation. Because of these differences, there is not a one size fits all answer to the best way to prepare and manage the season. You need to look at your business model and how the season affects your customers and suppliers. Armed with this information, what you need to be doing should be reasonably predictable.
Any period where operating conditions change means that there can be an impact on your profitability and cash flow. You need to look at both of these areas.
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Dear Santa,
Thank you for the opportunity to provide advice on your Australian tax position. We are concerned by a number of areas of your operation that will no doubt come under scrutiny by the ATO. We note these below:
GST
Most goods imported into Australia with a value above $1,000 are subject to GST. With approximately 4,329,000 children in Australia on your list, averaging $40 per gift (depending on whether they have been naughty or nice), we estimate that you will be liable for GST in excess of $17,317,192. We need to discuss tax structuring urgently.
We are also concerned that you also may face other commercial issues from Australian retailers who will perceive your ‘gift’ giving as a hostile attempt to gain market share (please google recent comments by Gerry Harvey and GST).
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If you established your business under a company structure as part of the set-up process there would have been shares issued, so you probably own shares in your company. Not a big deal you may think, with all the focus on the business and building it. The shares are just something necessary as part of the set up process and you may not even be holding the share certificates.
If this is you it might be an idea to have another think about it because the beneficial ownership of the company and the business rests with the shareholders. That’s OK while the status quo remains but the moment there is any change in the business the issue of who holds the shares becomes important.
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Working out your best assets
Starting up may mean launching your own venture. But it can also involve buying another business. However, be aware that the latter option isn’t hassle-free.
If you are looking for quick growth or you need scale quickly then buying a business can make a lot of sense. The hard work is to find the right business, making sure that it stacks up and then agreeing on the price.
Get past this and the hard part of the acquisition should just about be there. But there may be one more important step – agreeing the apportionment of the price across the different assets that make up the business.
Sometimes the buyer and the seller have different ideas about how to apportion the sale price. You’ll need to make a call on this because it will be required for the contract.
So does it really matter? Does it make a significant difference?
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