Dear Mr Claus,

Thank you for the opportunity to provide strategic business, tax and compliance advice for your operation. We're pleased you have initiated this advice as the Australian Taxation Office (ATO) has instigated a number of reviews that may impact on your operations.

Western Australia border closures and 'elf' contractors

We have several concerns about your relationship with the local elf contractor. Based on the information you have provided, the elf appears to be an individual and not operating as a logistics specialist — no ABN is on record. The elf is likely to be considered an employee regardless of what your performance contract specifies. As such, you will be liable for superannuation guarantee and tax will need to be withheld from any payment to them.

Business structure viability

The fact that you run a global enterprise that generates no income or profit but 'gifts' millions of toys each year, has significant brand value, but you have never lodged a tax return or paid tax in Australia, is likely to trigger an ATO investigation. We do not believe that the "it's magic" argument will suffice.

Research & Development

We understand that the 'flying sleigh' was developed in your workshop and the technology has developed markedly over the years. If incorporated, there is a potential to access the R&D tax incentive that provides entities with a turnover of less than $20m a refundable tax credit of your corporate tax rate plus 18.5%.

Please contact us urgently regarding these issues.