What’s deductible, what’s not, and what you need to know this festive season
December is a busy time for celebrations — Christmas parties, staff gifts, client gifts, and bonuses. But tax rules around entertainment, Fringe Benefit Tax (FBT), and deductibility can be confusing.
Here’s a clear guide to help you stay compliant while spreading festive cheer.
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1. Christmas Functions: What’s Deductible?
Christmas parties are usually considered entertainment expenses, which affects deductibility:
Type of Function Deductibility Notes & Examples
Staff/Client/Combined party (venue, food, drink) - 50% Most end-of-year events fall here
Food/drink at office (morning tea, afternoon tea, light refreshments) - 100% Event during work hours, not mainly for fun
Catered morning tea at the office - 100% Example of fully deductible function
Tip: If the party happens on business premises and is primarily work-related, you may claim 100%. Otherwise, expect 50% deductibility.
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2. Gifts for Clients: Deductible or Not?
Deductibility depends on whether the gift can be consumed or enjoyed (like food or experiences).
Type of Gift Deductibility Examples
Non-consumable / business-branded 100% - Calendars, stationery, merchandise, branded hampers, flowers
Consumable / enjoyable - 50% Wine, chocolates, food baskets, restaurant vouchers
Rule of thumb: If a client can eat, drink, or experience the gift, it usually counts as entertainment and is only 50% deductible.
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3. Gifts for Staff: Deductibility & FBT
Staff gifts can fall under entertainment, FBT, or PAYE, depending on the type.
Non-cash gifts (non-food hampers, vouchers, experiences)
· Deductible as a cost of employment
· FBT may apply if thresholds are exceeded
Food & drink gifts
· Usually 50% deductible (because staff enjoy them personally)
· Count towards FBT thresholds
FBT thresholds for unclassified benefits:
· ≤ $300 per employee per quarter and
· ≤ $22,500 total for all staff over the last 4 quarters
Examples:
· $150 voucher → deductible, no FBT
· $350 end-of-year gift → may trigger FBT
Tip: Keep gifts under the thresholds to avoid FBT headaches.
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4. Staff Bonuses: Taxable as Income
Cash bonuses are simpler:
· Deductible for the business: 100%
· Taxable for employees: Fully (processed through PAYE)
· Not subject to FBT
Remember: Treat cash bonuses like wages — deduct PAYE and other contributions as usual.
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Need Help Sorting Out Your Christmas Tax Treatment?
If you’re unsure which category your event or gifts fall into, or you want to avoid accidentally triggering FBT, we can help.
Send us your Christmas function or gift plans — we’ll confirm what’s deductible and whether FBT applies.
A little planning now can save you big headaches (and extra tax) later.
