Santa Encounters The ATO
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It is a little known fact that at one time Santa considered basing
himself in Australia. He was tired of the cold and snow and this was one
place generally devoid of both. Being a good corporate citizen, he was
anxious to fulfill his taxation obligations.

The first question the Australian Tax Office (ATO) asked was whether he
was carrying on a business. When you look at his operation all the
indicators say 'yes' except for the fact that Santa did not derive a
profit nor in fact any income. So if there is no income then there are
no deductions allowed or even if there were, then they would have no
effect unless Santa had some other income.

Certainly, as a manufacturer and employer, Santa had to register for a
tax file number, an ABN, Pay As You Go withholding, Fringe benefits tax,
Payroll tax (in every state and territory), Workers compensation and
Superannuation. You now know why some Christmas presents have been
delivered late. Santa also found he has some work to do for his
Employees. As he provided them meals, accommodation and transport, he
was liable for Fringe Benefits Tax (FBT).

He also had to register the uniforms of the little elves as corporate
wardrobe and make sure he keeps all of his employment records in place.
Unfortunately the Tax Act doesn't provide for a kilometer rate on
reindeer so Santa had to maintain records on his travel cost.
Fortunately, as his Christmas Eve journey only takes one day, a travel
diary was not needed.

Another issue for Santa was the milk, beer, whiskey, cakes and biscuits
he received when delivering presents. The ATO felt there was a barter
arrangement in place requiring Santa to quantify what and how much he
received and then attach a value to it that should be returned as his
income. His defense that there was no barter in place, that this was
purely a social or domestic arrangement he had with the children of the
world, was not accepted. Such a practice had all the hallmarks of a mass
marketed tax avoidance scheme that could lead to the growth of similar
unacceptable activities.

Another problem arose because Santa's generosity meant that his business
was making a loss. Like all taxpayers, he is subject to self-assessment
and substantiation. When the loss showed up on his tax return, he was
audited under the ATO's compliance program for individuals making
business losses. Did the non-commercial loss provisions apply? The
answer was an emphatic yes, as Santa's inadequate record keeping meant
he was unable to establish the value of the reindeer and a rickety old
sleigh.

Santa had a lot of explaining to do. Having sought professional advice
he realised he could not viably operate his business in Australia. He
has no option but to utilise the ultimate piece of tax planning and
relocate back to the North Pole. Here even the ATO is frozen out and
Santa lived happily ever after, vowing never to return to Australia.

Meanwhile, back at the ATO, the audit branch keeps the file open and is
still trying to issue a draft ruling to cover the Santa scam.