Unwrapping the Rules: Christmas Gifts, Parties & FBT Explained
Christmas is a wonderful time to thank your team and clients, but it’s also when questions about tax deductibility and Fringe Benefits Tax (FBT) start to pop up. The rules around entertainment, gifts and staff celebrations can be confusing, especially with the ATO’s focus on ensuring expenses are claimed correctly. Here’s a clear and client-friendly guide to help you understand what is deductible, when FBT applies, and how to avoid giving the ATO an accidental Christmas gift.
Staff Gifts
Christmas gifts for employees are usually straightforward as long as you keep the value under $300 per person (including GST) and ensure the gift is genuinely ad hoc, not part of a regular benefit. Gifts under this threshold often qualify as a minor benefit, meaning the business won’t pay FBT, and you can generally still claim a tax deduction and GST credits.
Suitable low-value gifts might include hampers, bottles of wine, chocolates, books, or gift cards. These types of items are generally considered non-entertainment gifts, which helps keep things simple from a tax perspective.
Cash bonuses, however, are treated very differently. A cash gift is not a “gift” in the eyes of the ATO, it’s considered as additional wages. This means PAYG withholding, superannuation, and Single Touch Payroll reporting all apply, even if the payment is framed as a Christmas thank-you. The good news is that these payments remain deductible to the business.
Christmas Parties
The tax treatment of Christmas parties depends mainly on where the event is held and how much is spent per person.
If you host a casual morning tea or lunch on your business premises during a workday, the event is generally FBT-free for employees, regardless of cost. However, because the benefit is exempt from FBT, the business cannot claim a tax deduction or GST credits for the food and drink.
When the party is held at an external venue, such as a restaurant or event space, the $300 minor benefit threshold becomes important. If the cost per person is less than $300, the benefit is usually exempt from FBT, but in exchange, you cannot claim a tax deduction or GST credits. If the cost is $300 or more, FBT applies, but the upside is that the expense becomes deductible, and GST credits can be claimed.
Taxis and Ride-Share Transport
Transport to and from your Christmas event can also have tax implications. If an employee’s taxi or Uber trip starts or ends at your office, it is generally exempt from FBT. For off-site events, the transport may also fall under the minor benefit exemption if the cost is below $300 and the trip is infrequent and provided on a celebratory occasion such as Christmas.
Client Gifts
Client gifts are a popular way to show appreciation during the festive season, and in most cases, they are fully tax deductible, provided they are not considered entertainment. Hampers, bottles of wine, stationery, branded items, or vouchers are all acceptable options as long as the purpose of the gift is to support business goodwill and strengthen the business relationship.
Taking clients out for a Christmas lunch, however, is not deductible. Regardless of the intention behind the celebration, entertainment expenses provided to clients do not qualify for a tax deduction and do not allow GST credits. This includes meals, drinks, concerts, sporting events, and other recreational activities.
Charitable Giving
Many businesses choose to make donations over Christmas. Charity donations can be tax deductible, but only if the organisation is registered as a Deductible Gift Recipient (DGR). You must also ensure the donation is a genuine gift – purchasing merchandise, raffle tickets, or fundraising items normally does not qualify, as you receive something in return.
Christmas Tax Quick Guide (2025)
| Scenario | FBT? | Tax Deductible? | GST Credits? |
|---|---|---|---|
| Christmas party on work premises (weekday) – employees | No | No | No |
| Christmas party off-site – less than $300 per person | No | No | No |
| Christmas party off-site – $300 or more per person | Yes | Yes | Yes |
| Staff gifts (non-entertainment) under $300 | No | Yes | Yes |
| Staff gifts $300 or more | Yes | Yes | Yes |
| Client gifts (non-entertainment) | Not applicable | Yes | Yes |
| Client entertainment (lunch, drinks, events) | Not applicable | No | No |
Key Takeaway
With some planning around where your event is held and how much you spend per person, it’s possible to celebrate the festive season generously without triggering unexpected FBT. Keeping gifts under $300, choosing non-entertainment options, and understanding the trade-off between FBT and deductibility can help make your Christmas tax-smart as well as enjoyable.
If you’re unsure how your Christmas plans fit within the ATO’s rules, we’re always happy to help you review your options.