FBT Considerations for Work Christmas Parties and Gifts - FY25

It is that time of year again when many businesses will now be considering the Christmas festive season, with planning and organisation of celebrations for workplaces, employees, clients, and associates.

For employers and business owners, it is important to understand the Fringe Benefit Tax (FBT) implications which arise when organising your Christmas Party or providing gifts as a show of appreciation for the work undertaken throughout the year.

Below, we highlight a range of scenarios surrounding work-related Christmas Parties and gifts, and their associated FBT implications to you:

Key Points

• The costs of food and drink associated with your Christmas Party are exempt from FBT if they are provided on a working date, on the business premises, and consumed by employees;
• A Christmas Party may be a 'minor benefit' and exempt from FBT if the cost of the party is less than $300 per head and certain considerations are met;
• Christmas gifts to employees may be a 'minor benefit' that is exempt from FBT where the value of the gift is less than $300;
• The cost of providing a Christmas Party to your employees is Income Tax deductible only to the extent that it is subject to FBT;
• The costs of entertaining clients are not subject to FBT and are not Income Tax deductible.

How Fringe Benefit Tax (FBT) Impacts your Christmas Party?   

For an employer, the costs (such as food & drink) associated with Christmas parties are exempt from FBT, as long as they are provided on a working day, on your business premises, and consumed by current employees.

If you were to host your event offsite at a restaurant or similar, certain FBT implications would arise. This is because a Christmas party held offsite is regarded as an 'entertainment' expense, which is generally not tax deductible unless it is subject to FBT. An exemption may be available for FBT if the cost per head is less than $300.

If you invite employee associates such as family or friends, FBT would be determined by the per head costs of the function. However, if you invite clients or suppliers, there are no FBT implications for these guests and the cost of providing the entertainment is not Income Tax deductible.

Listed in the table below are certain circumstances surrounding office Christmas parties and where FBT may or may not apply:

Staff and Client Christmas Gifts - Fringe Benefit Tax and Income Tax Implications       

Understanding Income Tax and FBT implications when providing gifts to staff or clients can be difficult. First, it must be determined whether the gifts are 'entertainment' or 'non-entertainment' in nature.

A 'non-entertainment' gift generally includes items such as Christmas hampers, a bottle or wine/spirits, gift vouchers, flowers, personalised stationery, etc.

An 'entertainment' gift is typically items such as dining and drinks (restaurant voucher), or recreation/amusement activities - including theatre, cinema, or sporting event tickets; flights & accommodation for a holiday, or a membership to a club.

We've outlined the table below the FBT and Income Tax implications involved in entertainment vs non-entertainment gifts:

Generally, it is considered that the best tax outcome for your business this Christmas is to give staff non-entertainment type gifts that cost less than $300 inclusive of GST per staff member, as the cost is fully tax deductible, with no FBT payable and GST credits can be claimed.

For More Information

If you are currently organising your staff of client Christmas party or considering gifting to employers / clients / suppliers, and need assistance in understanding where FBT implications may be involved, please contact the adviser team at Archer Gowland Redshaw on (07) 3002 2699 | info@agredshaw.com.au.