Christmas Gifts for Employees: Tax Deductions, GST & FBT

Christmas Gifts for Employees: Tax Deductions, GST & FBT

As the Christmas season approaches, you might be busy looking for gifts for your family and friends. If you're an Australian business owner, it may also be time to plan a good gesture for your employees. Perhaps you’re thinking of appreciating them this Christmas with a gift or a company party and wondering how to not struggle with tax implications?

Here’s a simple guide on understanding tax deductions and how to reduce your tax bill with all the expenses coming up this Christmas and New Year season.  

Are Christmas Gifts to Employees Tax Deductible?

As per the ATO, Christmas gifts for staff can be divided into two categories: Entertainment and Non-entertainment.  

Non-Entertainment Gifts

Gifts under $300 (including GST) are fully tax deductible, can claim any GST credits and no FBT applies. Gifts over $300 (including GST) are tax deductible, and can claim GST and FBT is payable. Some examples for the type of gifts are as below:

  • Company merchandise

  • Christmas hampers

  • Gift vouchers and gift cards

  • Flowers, clothes, beauty products

  • Perfumes, sport watches

  • Bottle of wine

Entertainment Gifts

Gifts under $300 (GST inclusive) are not tax deductible, no GST claimable and no FBT applies. Gifts over $300 (GST inclusive) are tax deductible, GST claimable and FBT liability applies. Some examples of entertainment benefits are as below:

  • Fancy dinners and drinks

  • Concert, theatre or movie tickets

  • Sporting event tickets

  • Flight or accommodation for holiday

  • Club memberships

Also note that gifts for customers, suppliers and volunteers are also a deductible expense, so long as they are not excessive or overly valuable. This is not clearly defined, so we advise that you exercise conservative judgement when making a call regarding the value of the gift. Also remember, gifts that are not an Entertainment expense are treated more favourably. 

Are your Company Christmas Parties Tax Deductible?

If you are planning to arrange a Christmas party for your employees and are concerned about how tax can be deducted, make sure you remember these tips. 

Your staff Christmas party is tax deductible, only if:

  • It is held on your business premises & held on a working day (no weekends or public holidays)

  • It is held for current employees, volunteers, customers, and suppliers only 

  • It is provided finger food or a light meal, no alcohol

  • No employee associates are present (e.g. spouses, children, etc.)

  • The cost of the party is less than $300 per person

As a small business, it can be challenging to stay on top of all tax terms and exemptions regarding staff gifts and Christmas functions. If you need further assistance, please seek professional advice.