Avoiding Taxing Christmas Surprises

Written By Isabella Bullivant

As the festive season approaches, businesses are preparing to celebrate with clients and teams. However, it’s essential to understand the tax implications of Christmas gifts and entertainment to avoid unexpected costs. Here’s a handy guide to ensure your festivities stay joyful—and tax-efficient!

Tax & Christmas

For GST registered businesses (not tax exempt) that are not using the 50-50 split method for meal entertainment.

For Your Clients

Entertainment Expenses
If you take clients out to lunch, remember that entertainment expenses are generally not tax-deductible and GST credits cannot be claimed. This applies even when the purpose is to build goodwill or enhance business relationships.

Gifting Instead of Entertaining
A thoughtful gift can be a more tax-effective way to spread holiday cheer. Business-related gifts are tax-deductible and GST credits can be claimed (provided the gift doesn’t fall under the ‘entertainment’ category).

Donations on Behalf of Clients
Consider donating to a charitable cause in your clients’ names. Donations to deductible gift recipients (DGRs) over $2 are tax-deductible for your business or for the client if they receive the deduction. It’s a thoughtful gesture that can make a real difference.

For Your Team

Christmas Parties

  • Office Parties on a Workday: Hosting your celebration at the office on a workday can eliminate Fringe Benefits Tax (FBT), regardless of spending per person. If you think you may be eligible to access this exemption, please contact our office to understand more. 

  • External Venues: If celebrating offsite, keep costs under $300 per person (inclusive of GST) to leverage the minor benefits exemption under the actual method and avoid FBT. However, expenses that are FBT-free are not tax-deductible or GST-claimable.

  • Transport Costs: Taxi travel starting or ending at the workplace is FBT-free. If the total cost per person (party, gifts, and transport) is also under $300, all elements can potentially be FBT-free. 

  • When FBT Applies: If your business hosts slightly more extravagant parties and goes above the $300 per person (inclusive of GST) minor benefit limit, you will pay FBT but you can also claim a tax deduction and GST credits for the cost of the event.

Gifts for Employees

  • Gifts valued under $300 per person (inclusive of GST) are FBT-free if they’re ad hoc and not part of a recurring arrangement, such as a monthly gym membership or multiple gift vouchers amounting to $300 or more.

  • Cash gifts are treated as salary and wages, triggering PAYG withholding and superannuation obligations. 

I wish to take the opportunity to thank our clients and referral partners for their support throughout the year. The team at FMA wish you all a very Merry Christmas and a Happy New Year for 2025!

Please note our office will be closed from Friday 20 December 2024 to allow our team some well deserved time off to relax & celebrate the festive season. Our office will reopen on Wednesday 8 January 2025. 

This Christmas period, we are proud to support local charity Hopefield, helping Sutherland Shire families in need during the holiday season. Last year, we donated 15 boxes of food, and we’re aiming even higher this year!

Should you have any queries regarding the contents of this blog, please contact our office on 02 9540 6888 or via info@fmapartners.com.au


Isabella Bullivant
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