Don’t let taxes dampen your holiday spirit!

Just as Santa meticulously checks who’s been naughty or nice, businesses need to keep an eye on tax regulations while spreading Christmas cheer. Organising festive gatherings for employees or clients could trigger Fringe Benefits Tax (FBT).

FBT is a taxation that employers incur when they provide additional benefits to employees, their families, or associates. It’s distinct from regular income tax and is determined by the value of the perk. The FBT year runs from 1 April to 31 March, and businesses must calculate and report any FBT due. With strategic planning—like Santa’s flawless delivery route—you can enjoy the celebrations while managing your tax concerns!

FBT exemption: A little Christmas gift from the tax office

The tax rules have a “minor benefit exemption”—akin to a small stocking stuffer. Benefits given to each employee costing less than $300 and aren’t regular occurrences are exempt from Fringe Benefits Tax (FBT).

Christmas parties fit this category perfectly since they are typically one-off events. If the expense per employee stays under $300, businesses can sidestep FBT complications. However, keep in mind: the more frequent perks are given, the less likely they’ll qualify for this exemption. Thankfully, Christmas is an annual occasion!

Christmas parties at the office

When hosting your Christmas party at your business premises during a regular workday, costs for food and drinks are free from FBT, regardless of the total spent. However, tax deductions or GST credits cannot be claimed for these expenses.

If family members of employees attend and the cost per person is under $300, FBT doesn’t apply, but again, tax deductions or GST credits aren’t available. If the cost exceeds $300 per person, FBT becomes applicable, but you can claim tax deductions and GST credits.

FBT check for Christmas parties at the office

Who attends	Cost per person	Does FBT apply	Is income tax deduction/Input Tax Credit available?
Employees only	Unlimited	No	No
Employees and their family	Less than $300	No	No
	More than $300	Yes	Yes
Clients	Unlimited	No	No

Think of it this way: at your Christmas party, food and drinks are like Santa’s bag of gifts—there’s no dollar limit for employees enjoying them on business premises. But if you include a band or other forms of entertainment, costs can escalate quickly. If the total expenditure per employee goes beyond $300, FBT will apply. Keep it under $300 per person, and you’re in the clear.

Christmas parties outside the office

If you choose an external venue for your Christmas party, such as a restaurant or hotel, it remains FBT-free as long as the cost per employee (including family members, if applicable) is under $300. However, note that tax deductions or GST credits cannot be claimed under these circumstances.

If the cost exceeds $300 per person, FBT will apply, but you can still claim a tax deduction and GST credits.

Good news: employers aren’t liable for FBT on taxi rides to and from the workplace due to a special exemption.

FBT check for Christmas parties outside the office

Who attends	Cost per person	Does FBT apply	Is income tax deduction/Input Tax Credit available?
Employees only	Less than $300	No	No
Employees and their family	Less than $300	No	No
	More than $300	Yes	Yes
Clients	Unlimited	No	No

Clients at the Christmas party

If clients are part of the Christmas party, no FBT applies to expenses concerning them, regardless of the party location. However, you cannot claim tax deductions or GST credits for any costs related to clients.

Christmas gifts

Many employers enjoy giving gifts to their employees during the festive season. As long as each gift costs under $300 per person, FBT doesn’t apply, as they typically aren’t viewed as fringe benefits.

FBT check for Christmas gifts

Who attends	Cost per person	Does FBT apply	Is income tax deduction/Input Tax Credit available?
Entertainment gifts	Less than $300	No	No
	More than $300	Yes	Yes
Non-entertainment gifts	Less than $300	No	Yes
	More than $300	Yes	Yes

However, FBT might be applicable if the gift is of an entertainment nature, such as concert tickets, movies, or holidays. Non-entertainment gifts—like hampers, vouchers, flowers, or a bottle of wine—usually escape FBT under $300. So, spread the festive cheer while keeping an eye on the tax office to avoid unexpected surprises!

For more information on tax implications, check out our Tax FAQs.