Paying Employee Bonus

Discussion in 'Accounting & Tax' started by Camoz, 8th Apr, 2020.

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  1. Camoz

    Camoz Member

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    Sorry for the simple question but I want to get advice on the most tax smart way of paying an employee a once off bonus. They only do casual work but have recently have made a huge positive impact on the business so I want to reward them but do not want them to get taxed a fortune.
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    I don't think there is much choice here.
     
  3. Mumbai

    Mumbai Well-Known Member

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    Make them permanent
     
  4. Propagate

    Propagate Well-Known Member

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    Also be careful with the Covid stimulus payments, if this is a one-off bonus and ultimately increases your stimulus payout you might get a "please explain" letter from the ATO asking why you deemed it appropriate to pay a bonus at this time? (assuming they are employed by you and you submit PAYGW for them that is).
     
  5. Camoz

    Camoz Member

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    I didn't think so but wanted to check. Thank you for taking your time
     
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  6. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    Keeping their employment is likely the best bonus a person could get in many industries. A a nice thanks with a gift under $300 as a one off (exempt as a fringe benefit).

    There may be ways to structure this to their advantage (and yours) and the stimuus incentives may well apply if its truly arms length. This is a time where tax advice on the end of a phone and a quick chat is great value.

    Some ideas:
    - Taxed bonus... This could enhance stimulus cashflow boost entitlements so its win win.
    - Changed conditions ie PT not casual
    - Increased hours
    - Increased pay rate
    - One off addition to super
    - An exempt fringe benefit (may be hard for a casual)
     
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  7. Scott No Mates

    Scott No Mates Well-Known Member

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    Meal allowance?
     
  8. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    Meal allowances aren't tax effective. If they are not for overtime and actually spent it's taxable
     
  9. Mike A

    Mike A Accountant Business Member

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    could you offer them an exempt fringe benefit ?

    paying for their taxi travel for a single trip beginning or ending at the employee’s place of work

    are they an employee ?
     
  10. nswvic

    nswvic Member

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    Giving them gift vouchers?
     
  11. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    Gift vouchers (plural) may be subject to FBT. A minor or infrequent gift voucher is exempt. A regular one is not. There is a second limb to the minor test which is often overlooked which can group

    One trap is the $300 minor benefit rule. The value of the minor benefit (eg gift card) must be LESS than $300. Its common for people to think it has a $300 limit.
    Read up on the five critera for minor benefits as some under $300 may be caught when accumuluated or given on a regular systematic basis in lieu of remuneration.

    eg Paul P/L given all employees a hamper worth $250 and agift card worth $200 and a bottle of alcohol worth $75 three times a year. These may accumuluate and not be minor and may be too frequent or regular. Hence the employer could have a expectation of maintaining records for each employee. The ATO use an example of employees given flowers on a birthday as an example of what may be acceptable vs more regularly which would not be.
     
  12. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    Gift vouchers (plural) may be subject to FBT. A minor or infrequent gift voucher is exempt. A regular one is not. There is a second limb to the minor test which is often overlooked which can group

    One trap is the $300 minor benefit rule. The value of the minor benefit (eg gift card) must be LESS than $300. Its common for people to think it has a $300 limit.
    Read up on the five critera for minor benefits as some under $300 may be caught when accumuluated or given on a regular systematic basis in lieu of remuneration.

    eg Paul P/L given all employees a hamper worth $250 and agift card worth $200 and a bottle of alcohol worth $75 three times a year. These may accumuluate and not be minor and may be too frequent or regular. Hence the employer could have a expectation of maintaining records for each employee. The ATO use an example of employees given flowers on a birthday as an example of what may be acceptable vs more regularly which would not be.