Gifts can be deductible or completely non-deductible depending on what type of gift you give.
Gifts That ARE Tax-Deductible
These are considered non-entertainment gifts, such as:
- Hampers
- Wine or alcohol (bottle only, not served)
- Chocolates
- Christmas baskets
- Gift vouchers
- Flowers
- Beauty or spa products
- Tech accessories
If given to employees or clients:
√ Deductible
√ GST credits allowed
√ FBT may apply depending on cost
Gifts That Are NOT Deductible
These are considered entertainment gifts, such as:
- Concert tickets
- Movie vouchers
- Sports or theatre tickets
- Restaurant vouchers
- Holiday accommodation
- Experiences
For these, the tax outcomes vary:
- Employees: may trigger FBT
- Clients: no FBT, not deductible, no GST credit
Staff Gifts vs Client Gifts — What’s the Difference?
The ATO treats these categories very differently.
Staff Gifts
If the gift is:
- Under $300 per employee
- And is a non-entertainment gift (e.g., hamper, bottle of wine)
Then it is:
√ Exempt from FBT under minor benefits
√ Tax-deductible
√ GST credit claimable
If the gift is over $300:
× FBT applies
√ Deductible
√ GST credit allowed
If the gift is an entertainment gift (e.g., concert tickets):
- Under $300: no FBT, but not deductible
- Over $300: FBT applies, and it becomes deductible
Client Gifts
Clients have it simpler:
- Non-entertainment gifts → Deductible
- Entertainment gifts → Not deductible
- No FBT applies to gifts for clients at all
Meals vs Entertainment — How Do You Tell the Difference?
Food and drink is one of the most common FBT problem areas.
Meal = Entertainment?
The ATO looks at:
- Why the meal is being provided
- Where it’s provided
- When it’s provided
- What you provide (e.g., alcohol = entertainment)
Examples:
- Meals + alcohol at a restaurant = entertainment → no deduction unless FBT applies
- Sandwiches during a staff training session = sustenance → deductible
- Finger food at a Christmas party = entertainment → non-deductible
Rule of thumb:
If it feels like a celebration or social occasion, it’s entertainment.
Minor / Low-Value Benefit Exemption ($300 Rule)
This is the rule that saves most businesses from FBT at Christmas.
A benefit (gift, meal, taxi, etc.) is exempt from FBT if:
- It’s under $300 (GST-inclusive)
- It’s irregular (not routine)
- It’s for employees or their associates
- It’s a genuine fringe benefit (e.g., a gift or party)
Important:
- If exempt under minor benefits, the cost is not deductible
- Gifts to clients do NOT use the minor benefits exemption (because they don’t attract FBT anyway)
Practical Examples
Example 1 — Staff Christmas Hamper ($150)
- Under $300
- Non-entertainment
Outcome:
√ Deductible
√ GST credit claimable
√ No FBT
Example 2 — Staff Christmas Party at a restaurant ($120 per head)
- Under $300
- Entertainment
Outcome:
× No tax deduction
× No GST credit
√ No FBT
Example 3 — Client Hamper ($130)
Outcome:
√ Deductible
√ GST credit claimable
√ No FBT
Example 4 — Employee Concert Tickets ($250)
- Under $300
- Entertainment gift
Outcome:
√ No FBT
× Not deductible
× No GST credit
Final Thoughts
The Christmas season is a great opportunity to reward staff and show appreciation to clients — but getting the tax treatment right can save you from unexpected FBT bills or denied deduction claims.
If you’re unsure whether your gifts or events will be deductible or attract FBT, our team can help you review your plans and provide clear, tailored advice before you spend.
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