Christmas Parties, Gifts and Bonuses:
Your Complete FBT Guide for 2025
Written By:
Emelia Afful (CA)
Director
A practical guide for business owners this festive season As the year comes to a close, many businesses begin planning celebrations, gifts and rewards for their teams. It is a great opportunity to acknowledge a year of hard work, but it is also a time when fringe benefits tax (FBT) rules can become confusing.
To help you stay compliant and avoid unexpected tax costs, this guide explains how Christmas parties, gifts, minor benefits and bonuses are treated for FBT and income tax purposes.
1. Christmas Parties: Understanding When FBT Applies
The FBT outcome for a Christmas party depends on three factors:
• where the event is held
• who attends
• how much is spent per head
A. Christmas Party Held on Business Premises
If your party is held at your workplace, on a normal working day, and attended only by employees:
FBT does not apply.
Food and drink for employees at an on-site event held during work hours is exempt from FBT.
However, where no FBT is payable, the business cannot claim a tax deduction or GST credits for the cost of the event.
B. Christmas Party Held Off-Site or Including Associates
If your party is held off-site (for example, at a restaurant or venue) or if employees bring an associate such as a partner or spouse, the $300 minor benefits rule becomes relevant.
You do not pay FBT if the cost per person is less than $300 (GST-inclusive) and it is considered reasonable to treat it as a minor benefit. This is the most common exemption used by businesses for Christmas parties.
Again, where a cost is exempt from FBT under the minor benefits rule, you cannot claim a tax deduction or GST credits.
If the cost per person exceeds $300, FBT may apply, but you can then claim a deduction and GST credits.
C. When Clients Attend the Christmas Party
If clients attend your event:
No FBT applies to the portion relating to clients as FBT relates to benefits provided to employees and their associates.
However, entertainment provided to clients is not tax-deductible, and no GST credits can be claimed.
2. Christmas Gifts for Employees
Christmas gifts to employees can also trigger FBT, depending on their value.
Gifts under $300 per employee
If the value of the gift is under $300 and the gift is considered infrequent and reasonable, it qualifies as a minor benefit.
No FBT applies.
However, if a gift is exempt from FBT under the minor benefits rule, the cost is not deductible, and GST credits cannot be claimed.
Gifts over $300
If the gift exceeds $300, FBT may apply. In this case, the cost becomes tax-deductible, and GST credits can be claimed.
3. Cash Bonus vs Gift: A Commonly Missed Tax Tip
Key Points to Remember
Many businesses want to provide something meaningful to employees at Christmas. However, the tax treatment varies significantly between giving a benefit and giving cash.
If you give a benefit
Examples include gift vouchers over $300, hampers or experience gifts.
These may attract FBT if they exceed the minor benefit threshold or occur frequently.
In many cases, deductions and GST credits are not available.
If you give a cash bonus
A cash bonus is treated as ordinary wages.
The employee pays income tax on it in their tax return.
The business does not pay FBT.
The bonus is tax-deductible and forms part of the normal payroll obligations.
This is often the most tax-effective and straightforward method for rewarding employees.
Example: Christmas Lunch Held on Business Premises
A business hosts a Christmas lunch at its office on a working day. Employees, partners and clients attend. The cost per head is $125, and the business also pays for taxi travel home.
Employees
No FBT applies because the meal is provided and consumed on business premises during a working day.
Taxi travel directly to or from the workplace is specifically exempt from FBT.
Associates (partners)
No FBT applies because the cost per head is under $300 and qualifies as a minor benefit.
Clients
No FBT applies to client costs.
Deductibility and GST
The business cannot claim a tax deduction or GST credits for any of the costs because they relate to entertainment that is exempt from FBT.
• Events under $300 per person may be exempt under the minor benefits rule, but not deductible
• On-site Christmas parties held during work hours are generally FBT-free
• Gifts under $300 may be exempt but are not deductible
• Cash bonuses avoid FBT, remain fully deductible and are taxed in the employee’s hands
• If FBT applies, deductions and GST credits become available
Final Thoughts
Christmas is a chance to recognise your team and celebrate achievements. With the right planning, you can do this in a tax-effective and compliant way.
If you need tailored guidance on your end-of-year celebrations or want to ensure you are meeting your FBT obligations, EmCARES Accountants can help.
To book a session or learn more, visit www.emcares.com.au.
Note: This is not tax advice and it is considered general in nature.
What are your compliance obligations this festive season?
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