The holiday season is a busy time for small businesses. Christmas parties, client gifts, and staff bonuses are all part of celebrating a successful year and showing appreciation. But when it comes to tax, it can be confusing: what Christmas expenses can I claim as a business, and what is subject to Fringe Benefits Tax (FBT)?

Understanding the rules will help you stay compliant with the ATO, minimise FBT, and still spread festive cheer. Here’s a clear guide to help your business navigate Christmas party tax deductions and staff and client gift tax rules.

1. Christmas Party Tax Deductions
The good news is that small business Christmas parties are often tax-deductible if they are work-related.

• Work-related parties: Costs for staff events, including venue hire, food, drinks, and decorations, are generally deductible as business expenses.
• Minor benefits exemption: If the total cost per employee is under $300, the benefit is usually FBT-free.
• Larger events: Costs above $300 per employee may attract FBT.

Tip: Keep detailed records, including receipts, invoices, and a list of attendees, to substantiate your Christmas party tax deduction.

2. Tax Rules for Gifts
Client Gifts

• Gifts to clients are deductible if they are business-related. Examples include branded merchandise, hampers, or gift vouchers.
• Gifts for personal purposes are not deductible.

Staff Gifts

• Gifts to staff are usually considered fringe benefits.
  Gifts under $300 per employee can qualify for the minor benefits exemption and remain FBT-free.
  Gifts over $300 or cash gifts may attract FBT

Tip: Non-cash gifts such as hampers or gift vouchers are generally more FBT-friendly than cash bonuses.

3. Keep Accurate Records
The ATO requires proper documentation for all Christmas-related deductions:

• Receipts and invoices
• Details of party attendees
• Records of staff and client gifts (who received them, their value, and the purpose)

Accurate records ensure your Christmas party and gift deductions are legitimate and minimise the risk of audit.

4. Fringe Benefits Tax (FBT) Considerations
FBT applies to certain non-cash benefits. Key points for Christmas season deductions:

• Minor benefits exemption applies to gifts and events under $300 per employee.
• Cash gifts or bonuses above the threshold usually attract FBT.
• Inclusive entertainment costs (food, drinks, and activities) may affect how FBT applies.

Tip: Consulting an accountant can help structure gifts and parties in a tax-efficient way.

5. Maximise Your Deductions
To make the most of Christmas-related business deductions:

• Keep party costs per employee under $300 where possible.
• Choose non-cash gifts to reduce FBT exposure.
• Plan parties and gift giving early to manage budgets.
• Maintain separate records for all festive expenses.

Small planning steps now can save your business significant tax costs later.

6. Seek Professional Advice
Rules around Christmas party tax deductions, staff gifts, client gifts, and FBT can be tricky. If you:

• Plan multiple events
• Give gifts exceeding the minor benefits threshold
• Mix client and staff gifts

…getting professional guidance ensures your claims are compliant and tax-efficient.

At Tax Store, we help businesses structure Christmas celebrations to maximise deductions, minimise FBT, and stay compliant with the ATO — all while keeping the festive spirit alive.

Celebrate Stress-Free This Holiday Season
With careful planning, you can enjoy your Christmas party, reward staff, delight clients, and still keep your business tax-smart.

Contact Tax Store today for advice on making your Christmas expenses fully deductible and compliant with ATO rules.