small business owners

5 payroll pitfalls to avoid over the Christmas break

Christmas cards festival bookkeeping

With only a week to go until Christmas many small business owners are desperately trying to keep everything together and make it through this busy time of year.  It’s not just running a business, it’s also end of school functions, sport functions, work functions, organising pets and holidays, organising food and getting the present shopping done.

If you have employees then you can also throw payroll issues into the mix as well.  The Christmas period brings with it a few extra challenges to face as an employer, so I’ve prepared these 5 tips to help you through so you’ve still got some wind left in your sails to enjoy the silly season. These tips apply to Australian readers, but will give other readers some ideas as to what they need to look out for as well.

1. Christmas bonuses and super

Bonuses are considered Ordinary Time Earnings (OTE) and must therefore be included in your calculation of the super guarantee for your employees. More info on bonuses here.

2. Asking employees to take Annual leave

This is really interesting and can be a bit of a touchy topic for employers and employees.  When I was an employed bookkeeper I was asked to use up some of my annual leave – not just over the Christmas break but when I had a bit accumulated during the year.  An employer can only direct an employee to use up their annual leave in some situations. There is often an amount of notice you must give your employees as well. You need to check the relevant Award or Registered Agreement to see under what circumstances you’re allowed to direct your staff to take annual leave.

2. Rest breaks

Many businesses are busy this time of year, however there is a maximum amount of hours you can make your employees work without a break. Check the Award or registered agreement that your employees come under. For example, the Clerks Private Sector Award 2010 stipulates (at the time of writing) that employees who work for 5 hours or more must get at least 1 meal break.  More info on Awards and break entitlements here.

4. Casual vs part-time vs fixed term

There are differences between casual employees, part-time employees and fixed term employees – and yes, the onus is on the employer to ensure they have categorised the employee correctly and have given them the appropriate entitlements. You may hire someone on a casual basis over the Christmas break but the actual working conditions may change over time and their entitlements should be reviewed accordingly.

5. Christmas parties

Ahhh … Christmas parties.  What to claim and what not to claim? There are rules around when you can claim a tax deduction, when you can claim GST credits and what you need to pay fringe benefits tax on.  First you need to determine if the food and drink you’re providing is considered “entertainment” in the eyes of the ATO.  You need to look at why the food and drink is being provided, what type, when it’s being provided and where (on or off business premises). You can find the ATO’s rules regarding providing entertainment and the associated taxes here. There are some helpful scenarios that walk you through the process of deciding what to claim.

Wishing everyone a great Christmas.

Happy bookkeeping…



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4 Common Bookkeeping Mistakes

You may have been doing your own business bookkeeping for many years, or maybe you are just starting a new business venture. Have a browse through these top 4 common bookkeeping mistakes and see if you recognise anything that you have been doing in your business.

1. Combining personal and business finance.
Don’t get too caught up in the early stages of starting a new business to overlook this one – it’s an important one! Even for sole traders, not separating your finances can cause serious headaches. Get a separate bank account organised and ensure all business income goes in here from day one.

2. Not reconciling bank accounts
Reconciling your business bank accounts is really one of the basic fundamentals of good business bookkeeping. Where I work it is done daily – that way any data entry errors are picked up whilst everything is easy to recollect. You may only need to do it weekly or monthly. Viewing your bank statements on a regular basis will also help keep you in tune with your cashflow situation. Simply put, reconciling means that your bank statement matches your business books. Bank account fees and interest get entered into your books and unpresented cheques can be followed up. Many accounting software packages can be set up for automated bank feeds – doing much of the work for you.

3. Not keeping receipts
Get into the habit of keeping every business related receipt – claim every expense you are entitled to and ensure you have proof of purchase if you are ever audited. Good organisation and filing will help with this one. Place a spike on employee desks for credit card and fuel receipts. Get employees into the routine of emptying their work vehicles of any parking tickets. Promptly file away paid bills. If you are not sure whether you can claim the expense, keep the receipt anyway and ask your accountant at tax time. Easy!

4. Getting behind with the books
Small business owners often have to juggle many roles and bookkeeping will sometimes have to go on the back-burner. If you are at the point where you cannot keep on top of your bookkeeping, consider hiring a professional freelance bookkeeper or part-time bookkeeper. It is important that at any time you can look at your books and establish the financial health of your business – whether you are making a profit, whether your customers are paying within terms, what you owe etc. If hiring a bookkeeper isn’t an option, get into the routine of doing a little of the bookkeeping often.