Originally posted October 2025. Updated for the 2026 festive season, with clearer guidance on the FBT minor benefits threshold, rideshare travel, and which gifts you can still claim.
Tax might not be high on the list of things you’re thinking about as Christmas approaches. But Christmas will be here in a moment, and many employers will be thinking about recognising their team’s efforts throughout the year. You may already have plans in place, but have you thought about how to manage tax and Christmas gift-giving? Especially Finge Bentifits Tax (FBT) on your staff Christmas gifts and work party.
Feel free to celebrate – but make sure you don’t get stung with unexpected taxes. FBT and associated income tax and GST pitfalls are the big ones to watch out for.
What is Fringe Benefits Tax
Certain benefits provided to employees or their associates in connection with employment can attract FBT. Exemptions and concessions may apply. Where FBT is payable, the employer pays it at 47% of the grossed-up taxable value. So, a fully taxable Christmas gift can cost almost double its purchase price, before income tax deductions and any GST credits.
There are no different FBT rules for staff gifts or parties at Christmas time!
That said, there is room within the rules to keep the Christmas spirit bright. Here are five tips to try to keep your celebrations tax-free.
These tips assume a business that is subject to income tax and uses the actual method to value entertainment benefits. Different rules can apply to tax-exempt organisations and businesses using alternative entertainment valuation methods.
1. Give until it doesn’t hurt
Keep in mind “minor benefits” and “$300” when deciding how to finance your Christmas gifts and parties.
There is an FBT exemption for minor benefits valued at less than $300 (incl. GST) per person, where the benefits satisfy these criteria:
- they are provided to staff or their associates (for example a spouse),
- they are provided on an “infrequent” or “irregular” basis, and
- the benefit is not considered a reward for services.
The $300 threshold applies to each benefit provided, not to a total value of “associated benefits”.
So if, as a generous employer, you host a party and also give a gift to everyone, the party and the gift are considered separately for FBT. If each is less than $300 per person, they are both generally FBT-free.
2. Where to hold the party and who gets invited
If you host the Christmas party at your workplace on a work day, and limit attendees to current employees, it will most likely be FBT exempt.
But, the party will not be fully exempt if:
- “associates” of employees (for example family) come along – the employees’ share is still exempt, but the associates’ share is not, and/or
- the party is away from the workplace.
Then it’s important to stay below the $300 threshold and satisfy the “minor benefit” conditions for anyone not covered by the exemption.
3. Taxis and rideshare to or from the party
If you are considering paying for a taxi or rideshare to get your staff from point A to point B, the important consideration will be where points A and B are.
- If the travel is from work to a venue where the party is being held (and vice versa), the Tax Office says this is all part of the fun and is exempt.
- However, if staff members are taken between home and the party, the cost might attract FBT, unless it qualifies as a minor benefit (less than $300 and infrequent).
Rideshare services such as Uber are treated the same as taxis for FBT.
4. How are “gifts” of cash treated by the ATO?
If you’d rather give cash bonuses instead of gifts or covering the bar tab, the payment is treated in the same way as salary and wages.
- PAYG withholding and super guarantee obligations will be triggered.
- The Tax Office will treat the bonus as ordinary time earnings.
5. Income tax deduction and GST credits for employee gifts
While you’re in the giving spirit, keep in mind that if an entertainment benefit is exempt from FBT, you cannot claim it as an income tax deduction. Nor can you claim any GST credits.
Non-entertainment gifts are different – they stay deductible, with GST credits available, even when they are FBT-free. Most standard retail gift vouchers do not include GST on purchase.
Whether a gift is deductible and GST credits can be claimed depends on whether the gift is “non-entertainment” or “entertainment”.
- Non-entertainment gifts generally include flowers, bottles of wine and hampers to take home, beauty products and general retail gift vouchers.
- Entertainment gifts include items of “recreation” such as tickets to a musical, theatre, movie, or sporting event.
Free guide to the tax treatment of staff gifts and parties
Download our free, easy reference guide to how staff gifts and parties are treated for FBT, income tax and GST.
Need a hand?
This year, when you enjoy the festive season, keep these tips in mind so the giving doesn’t hurt come tax time. Check with us for assistance as there are a few details to consider.
