Planning your work Christmas party or staff gifts for Christmas 2026? Check the fringe benefits tax (FBT), income tax and GST treatment before committing to the spend. Where you celebrate, who attends and how you value meal entertainment can change the outcome.
Christmas 2026 falls in the FBT year from 1 April 2026 to 31 March 2027, not the standard income tax year. The FBT rate for that year is 47%.
Key points for employers
- The minor benefits exemption requires a value of less than $300, including GST where applicable, plus satisfaction of the other conditions. Exactly $300 does not qualify.
- Food and drink consumed by current employees on your business premises on a working day may be exempt, regardless of cost. This exemption does not extend to their partners or other associates.
- Exempt Christmas entertainment generally means no income tax deduction and no GST credit.
- Non-entertainment gifts can have a different tax outcome from meals, event tickets and restaurant vouchers.
- Your meal-entertainment valuation method matters. Do not apply the tables below without checking which method your business uses.
The $300 threshold is not an automatic exemption
Section 58P of the Fringe Benefits Tax Assessment Act 1986 requires the notional taxable value of a minor benefit to be less than $300 and, having regard to the relevant circumstances, for it to be unreasonable to treat the benefit as a fringe benefit.
Relevant considerations include the frequency and regularity of similar benefits, the total value of similar and associated benefits, valuation difficulties and the circumstances in which the benefit is provided. Regular benefits or benefits provided as a reward for services require particular care. Salary-sacrifice arrangements generally do not qualify.
Be careful: this is not a $300 annual allowance or a deduction from the value of a more expensive benefit. Assess each benefit and recipient correctly, and consider associated benefits rather than artificially splitting costs.
Christmas parties: location and attendees matter
Under the actual-value approach, food and drink provided to and consumed by current employees on your business premises on a working day are generally exempt from FBT. The premises exemption does not cover employee associates, such as partners. An offsite restaurant function does not qualify for that premises exemption, although the minor benefits exemption may apply.
The following summary assumes an ordinary commercial employer, the actual-value approach, no salary packaging, no employee contributions and no other special exemption. “Minor benefit” means all relevant conditions are satisfied, not merely that the cost is below $300.
| Christmas party scenario | FBT | Income tax deduction | GST credit |
|---|---|---|---|
| Current employees: food and drink consumed on business premises on a working day, any cost | Generally exempt | Generally no | Generally no |
| Employee associates on premises, or employees and associates offsite: minor benefit below $300 per recipient | Exempt if conditions met | Generally no | Generally no |
| Employee associates on premises, or employees and associates offsite: $300 or more, or minor benefit conditions not met | Generally taxable | Generally yes, to the taxable employee/associate extent | Generally yes, if otherwise entitled |
| Clients or suppliers attending in that capacity | No | Generally no for entertainment | Generally no for entertainment |
Allocate costs between employees, associates and business guests. Keep attendance records and invoices. Where a person attends in more than one capacity, confirm the correct treatment rather than assuming they are simply a client.
Check your meal-entertainment valuation method
The table above is not a universal result for every employer. The ATO allows different approaches to valuing eligible meal entertainment:
- Actual value: identify the expenditure attributable to employees and their associates, with exemptions considered where available.
- 50:50 split: generally bring 50% of total meal-entertainment expenditure into the FBT calculation, including expenditure on clients. The minor benefits exemption and the usual on-premises employee exemption cannot simply be applied to exclude that expenditure.
- 12-week register: use a representative continuous 12-week register to calculate the employee-and-associate percentage and apply it to the year's meal-entertainment expenditure, subject to the applicable rules.
An elected meal-entertainment valuation method applies to all relevant meal entertainment for the FBT year. These methods do not apply to recreation entertainment or salary-packaged meal entertainment in the same way. Confirm the corresponding income tax and GST treatment with your adviser before relying on a per-head exemption.
Christmas gifts: entertainment or non-entertainment?
Non-entertainment gifts commonly include hampers, flowers, stationery and a bottle of wine to take home. General retail gift cards may also fall into this category. Restaurant vouchers, theatre or sporting tickets and holiday experiences generally involve entertainment. Check what a voucher actually entitles the recipient to receive; not all gift cards have the same treatment.
The following table assumes ordinary business expenditure and the actual-value approach where relevant. Other exemptions, valuation rules and the income-producing purpose must still be considered.
| Gift and recipient | FBT | Income tax deduction | GST credit |
|---|---|---|---|
| Employee non-entertainment gift below $300, satisfying minor benefit conditions | Exempt | Generally yes | Where otherwise entitled |
| Employee non-entertainment gift of $300 or more, or not qualifying as a minor benefit | Generally taxable | Generally yes | Where otherwise entitled |
| Employee entertainment gift satisfying minor benefit conditions | Exempt | Generally no | Generally no |
| Employee entertainment gift treated as a taxable fringe benefit | Yes | Generally yes, to the taxable extent | Generally available to that extent, if otherwise entitled |
| Client or supplier non-entertainment gift | No, when not employment-related | Generally available where connected with earning business income and not private or capital | Where otherwise entitled |
| Client or supplier entertainment gift | No, when not employment-related | Generally no | Generally no |
A GST credit is not automatic simply because a cost is deductible. You must satisfy the normal GST requirements, including GST registration and evidence of a creditable acquisition. Some purchases, including certain vouchers, do not include GST at the time of purchase.
Practical considerations before you book
- Set a GST-inclusive budget per recipient, allowing for all relevant event costs.
- Record the date, location, attendees and their capacity: employee, associate, client or supplier.
- Identify gifts separately from party expenditure and assess each benefit correctly.
- Check similar benefits provided throughout the year before relying on the minor benefits exemption.
- Review transport, accommodation, recreation and employee contributions separately; the food-and-drink premises exemption does not automatically cover them.
- Confirm your meal-entertainment valuation method before finalising the tax treatment.
- Keep invoices and calculations supporting FBT, deductions and GST credits.
A modest, infrequent non-entertainment gift can be a tax-effective way to thank staff, but there is no single “best” arrangement for every business. Check the facts before claiming an exemption or deduction.
Get advice before committing to the spend
For help reviewing your Christmas party and gift arrangements, contact the adviser team at Archer Gowland Redshaw on (07) 3002 2699 | info@agredshaw.com.au.
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