As the festive season approaches, many businesses are gearing up for end-of-year celebrations, staff gifts and client entertainment. While it’s a great time to recognise your team’s hard work, it’s also important to stay on the right side of the ATO, especially when it comes to Fringe Benefits Tax (FBT).
Here’s a practical refresher on what you can and can’t do this Christmas to avoid unexpected FBT liabilities.
Christmas Parties: When FBT Applies
The good news?
In many cases, Christmas parties are exempt from FBT when certain conditions are met.
✔️ Exempt (No FBT Payable)
Your Christmas party is generally exempt if:
- It’s held on your business premises during a working day and only employees attend.
- It’s held off-site (e.g., restaurant or venue) and the cost per employee is under $300, including GST.
- The cost per employee’s family member/plus-one is also under $300.
❌ Not Exempt (FBT May Apply)
FBT may be triggered if:
- The party is held off-site and the cost per person exceeds $300.
- You invite employees’ associates (partners, family members) and their cost is over $300.
🎁 Christmas Gifts: How the Rules Work
Gifts can be a thoughtful way to thank your team or clients — but they can also have FBT consequences.
✔️ No FBT on Minor Gifts
You can provide employee gifts under $300 (GST inclusive), such as:
- Hampers
- Bottles of wine
- Movie or event vouchers
- Small electronics
These are generally exempt if:
- The gift is under $300, infrequent, and
- It’s not entertainment (e.g., a restaurant voucher is entertainment).
❌ FBT on Entertainment Gifts
FBT will likely apply if:
- Entertainment gifts exceed $300.
- You provide items considered “entertainment,” such as:
- Tickets to concerts or sports events
- Restaurant vouchers
🍽️ What About Meals & Drinks?
Food and drink provided at a Christmas party is classified as entertainment, so whether FBT applies depends heavily on:
- Location (on-site vs off-site)
- Cost per head
- Who attends
Important tip: the minor benefits exemption cannot be applied to functions held on-site for associates (e.g., spouses). Associates only gain the exemption for off-site events under $300.
📌 Practical Tips for Staying ATO-Compliant
- Keep detailed records of costs per person, including employees and associates.
- Categorise costs clearly (gifts vs entertainment vs general staff amenities).
- When in doubt, stick to under $300 per person for off-site events and gifts.
- Consider holding your Christmas party on your premises during work hours to avoid FBT entirely.
- If you provide both gifts and parties, assess each benefit separately for the minor benefits exemption.
🎅 Final Thoughts
The Christmas season should be a time of celebration—not compliance stress. Understanding the FBT rules around parties and gifts can help your business enjoy the festivities without unexpected tax bills.
If you’re unsure whether your planned Christmas activities may attract FBT, the MJC Partners team is here to assist. Reach out anytime for advice tailored to your business. Contact Us!
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