Article Summary: 

In the lead-up to the festive season, many Australian businesses begin planning Christmas parties, gifts for staff and clients, and end-of-year thank-yous. But which expenses are tax-deductible, and when does Fringe Benefits Tax (FBT) apply? This article breaks down the common business expenses during the Christmas period, including staff parties, gift cards, and hampers. It outlines what is and isn’t deductible, when FBT kicks in, best-practice record-keeping tips, and strategies to keep your holiday spending efficient and compliant. We also highlight key 2025 trends for festive business spending and provide links to practical tools and related Cosca articles. 

What Christmas expenses can businesses claim as tax-deductible? 

This is one of the most common questions we hear from clients in the lead-up to December. 

In Australia, whether a Christmas expense is tax-deductible depends on: 

  • Who receives the benefit (employee, associate, client) 
  • What type of benefit it is (entertainment vs non-entertainment) 
  • Where it is held (on-site vs off-site) 
  • Cost per person 

Key points: 

  • Client entertainment is generally not deductible and does not attract FBT. 
  • Employee entertainment may attract FBT unless it falls under the minor benefits exemption. 
  • Non-entertainment gifts (e.g. gift cards, hampers) for employees can be deductible and FBT-exempt if under $300 and infrequent. 

According to the ATO, non-entertainment gifts under $300 per employee that are infrequent and irregular can be both tax-deductible and FBT-free. 

Are Christmas parties subject to Fringe Benefits Tax (FBT)? 

Yes, they can be. The application of FBT depends on: 

Scenario FBT Applies? Tax Deductible? 
On-site party during work hours (employees only) No No 
Off-site party, cost under $300/person (employees) No (Minor benefit) No 
Off-site party, over $300/person Yes Yes 
Associates or clients attending Yes (associates if > $300), No (clients) No (clients) 

If the cost of food, drink, or entertainment is under $300 per head, and it is provided infrequently, it may qualify for the minor benefits exemption and be FBT-free. 

Source: ATO – Entertainment Fringe Benefits 

Tip: Use the actual method or 50/50 method to calculate FBT liability – check with your accountant on the most effective approach. 

Are staff gifts like gift cards and hampers tax-deductible? 

Yes – with conditions. The tax treatment depends on the type of gift and its value. 

Non-entertainment gifts (e.g. gift cards, hampers, wine, flowers): 

  • Under $300 (incl. GST): FBT-free, tax-deductible, and eligible for GST credits 
  • Over $300: FBT may apply, but still tax-deductible 

Entertainment gifts (e.g. tickets to events, travel, holidays): 

  • Generally not tax-deductible 
  • May attract FBT 

Remember: if a benefit is FBT-exempt (under minor benefits), it is not deductible, and you cannot claim GST credits. 

Tip: Avoid entertainment-based gifts if you want a clean deduction and no FBT hassles. 

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What about gifts to clients and suppliers? 

  • Non-entertainment gifts: Generally tax-deductible (e.g. wine, gift baskets, branded items) 
  • Entertainment gifts: Not deductible (e.g. concert tickets) 
  • No FBT applies to gifts provided to clients 

Tip: Clearly document the purpose of the gift and recipient type in your accounting software. 

What records should I keep for festive spending? 

Accurate record-keeping is essential to determine: 

  • Whether FBT applies 
  • Whether the expense is deductible 
  • Whether GST credits can be claimed 

Best practice: 

  • Keep receipts/invoices for every transaction 
  • Record the date, amount, and recipient(s) 
  • Distinguish between employees, associates, and clients 
  • Note the purpose of the gift or event 
  • Use categories in your accounting system (e.g. “Christmas Party – Employees”) 

What are smart strategies to manage Christmas spending in your business? 

Here are 5 tax-smart and practical tips for this festive season: 

  1. Host on-site events during work hours to minimise FBT 
  1. Set a per-person budget and stick to under $300 per head 
  1. Choose non-entertainment gifts to simplify tax treatment 
  1. Track expenses by category and recipient in your accounting system 
  1. Review your FBT liability early with your accountant 

What’s new in 2025 for business festive spending? 

Here are 3 trends to watch this year: 
  1. Digital gift cards are becoming the most popular staff gift choice. Easy to track and usually tax-efficient. 
  1. Increased FBT scrutiny by the ATO – audits are focusing on entertainment deductions and minor benefit misuse. 
  1. Inflation and cost pressures are driving a return to on-site, lower-cost parties and local catering. 

FAQs

Are Christmas parties for clients tax-deductible?

No. Entertainment provided to clients is not deductible and doesn’t attract FBT.

Can I give employees alcohol or wine as a gift?

Yes, these are non-entertainment gifts. If under $300 and infrequent, they are deductible and FBT-free.

Can I claim GST credits on Christmas expenses?

Only if the expense is deductible and not exempt from FBT. For example, if FBT exemption applies, you generally cannot claim GST credits.

Do I need to report Christmas gifts or parties on my BAS?

No. FBT is reported separately from BAS. However, if your business is liable for FBT, it must be reported on your annual FBT return.

Do you have any resources around personal spending for this holiday season?

Yes, you can read our article How can Australian Households Avoid Overspending This Holiday Season? for more information around personal spending or speak to our personal wealth advisors.

Need help with holiday spending? 

Christmas is a time for celebration and appreciation, but for businesses, it also comes with important tax and compliance considerations. By understanding the FBT rules, choosing deductible gift options, and keeping proper records, you can ensure your festive generosity is both rewarding and tax-efficient. 

Cosca’s Strategic Accounting and Business Advisory teams are here to help you plan your year-end spending strategy, ensure compliance, and stay ahead of the ATO. 

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