Is Santa a tax cheat?
Given the sheer amount of conversation around global business and tax, we thought we'd take a light-hearted look at Santa, who is by definition and myth, a truly global figure for many of us. We wondered what the ATO would make of his activities, particularly in light of its recent focus on clawing back revenue from international firms who operate in Australia but don't pay quite so much tax as Mr Hockey thinks they should.
Santa does, after all, run a global business that generates no profits but 'gifts' millions of toys each year produced in his offshore factory. The ATO has been looking closely at any business or individual that operates within Australia but has significant transactions or operations internationally.
So what's likely to trigger an investigation for Santa? Let's find out.
One of the key areas of Santa's operation would be a review should be of the employment status of the 'Santa's little helpers' based in Australia to determine if they are contractors or employees.
If the helpers are deemed to be employees, Santa may be liable for the superannuation guarantee for this year (9.5% from 1 July 2014) and all previous years. It may be hard to argue that they are truly independent given the level of corporate branding involved.
Santa's organisation will also need to register for workers compensation in each state he operates in and will need to consider state-based payroll tax obligations. Hopefully he will not fall foul of any workplace relations' obligations!
Most goods imported into Australia with a value above $1,000 are subject to GST. With approximately 4,503,075 children in Australia on Santa's Naughty or Nice list, averaging $40 per gift the ATO might estimate that Santa would be liable for GST in excess of $18,012,300. Tax structuring should be part of Santa's agenda when talking to his accountant.
Santa may be subject to Australian tax laws and if so, a number of deductions would be available to him. His reindeer, for example, are likely to be considered 'beasts of burden' and as such can be depreciated as plant.
There are currently no provisions within Australian tax law to allow the Commissioner the discretion to ignore Santa's tax liabilities as a goodwill gesture.
If you think that your business might be affected by some of the issues facing Santa, please give us a call on 02 9957 4033.
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Last updated December 2014. This article is provided for information purposes only and should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.
This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.