As any business owner knows, an engaged and committed staff are a huge asset for the business and worth investing in beyond their pay packets.
With the intensive seasonal work such as calving and mating all but over, staff will have put in some long hours over the past few months, often with very little time off. These seasonal long hours are often expected on a farm, but a token of appreciation goes a long way to maintaining staff morale and helping build a strong workplace culture as well as supporting other factors such as health and safety compliance and productivity. There are various ways to reward farming staff and owners from shouts and gifts to bonuses, and providing the farm is in operation as a business, rewards can be claimed as expenses, and provided criteria are met Fringe Benefit tax may not apply. It is useful to have a guideline of what type of expenses and percentage of these rewards can be claimed back.
A general rule is that when the business shout is not a big celebration, is held on the farm and is work-related then it’s 100 per cent deductible. So, that might be providing a staff lunch on the farm, bought from the bakery on the way home from a trip to pick up farm supplies. However, if it’s going to be a big gathering such as a Christmas work do, held on the farm with celebration drinks, then it counts as a ‘party’ under the rules and is 50 per cent deductible. If it’s held off the farm such as at the local bar, or is a team building outing to the rugby or a show, it’s also limited to 50 per cent deductibility. Similarly food and alcohol consumed at a restaurant whilst conducting a business meeting is limited to 50 per cent deductibility. Bonuses and gifts are another common way to reward staff. A gift such as a sports shop or supermarket voucher, for example, will be 100 per cent deductible and will not be caught under the Fringe Benefit tax rules (so not deemed taxable income for the individual) if the total of the gifts remains under $1,200 a calendar year for each staff member, (maximum of $22,500 for all staff). A one-off bonus in pay is also 100 per cent deductible, but subject to PAYE so all the normal deductions like KiwiSaver, student loan and child support must be deducted.
Farmers can also claim a deduction for rations and canteen expense, providing the expense is incurred as part of their farming operation. These include tea, coffee, milk and biscuits kept at the cowshed or home and consumed by staff business owners - providing they work in the business. Catering expenses for hosting other farming associates such as the vet and bank manager is 100 per cent deductible. Lunch purchased on the run between farming jobs at the local dairy is also 100 per cent deductible as canteen expense. Deductions for rations and canteen must be based on the actual expense incurred, and not an estimate put through at the end of the year. An easy way to keep track of the cost, is to purchase the goods through a trading store such as Farm Source or Farmlands. If you purchase items with your general groceries, you will need to be able to identify which costs are purely for the farm, in order to claim them.
There is no hard and fast rule as to how much can be claimed. It really depends on each individual farm. If you would like further clarification on how to best reward farm staff contact the experts at BDO Taranaki today.