Christmas Staff Expenses: What’s Claimable, What’s Not, and What Employers Need to Know

The festive season is a time many businesses like to acknowledge their staff with Christmas parties, gifts, or end-of-year celebrations. While these gestures are great for morale, they can quickly become confusing when it comes to tax, deductions, and Fringe Benefits Tax (FBT).

This blog breaks down what is and isn’t claimable, how the ATO classifies Christmas staff expenses, and the common traps we see businesses fall into every December.

📌 The Quick Summary on Christmas Staff Expenses

Before we go into the detail, here’s the high-level rule of thumb:

• Non-entertainment gifts (e.g. hampers, gift cards, wine)

  • ✔️ Usually tax deductible

  • ✔️ No FBT if under $300 per employee (minor benefits exemption)

  • ✔️ GST credits generally claimable

• Entertainment expenses (e.g. meals, parties, tickets)

  • ❌ Generally not tax deductible

  • ❌ GST credits usually not claimable

  • ⚠️ May still be FBT-exempt if under $300 — but not deductible

• Where and how the event is held matters(on-site vs off-site, employees vs associates, cost per head)

This is where most confusion arises — and where planning ahead and knowing your stuff can make a big difference.

🎁 Employee Gifts – Entertainment vs Non-Entertainment

The ATO draws a clear line between entertainment and non-entertainment gifts.

✔️ Non-Entertainment Gifts

These include:

• Gift cards

• Hampers

• Bottles of wine

• Chocolates

• Flowers

• Skincare or personal items

If the value is under $300 per employee, these gifts are generally:

• Tax deductible

• Exempt from FBT under the minor benefits exemption

• Eligible for GST credits (if GST applies)

ATO classification: Non-entertainment benefits

❌ Entertainment Gifts

These include:

• Tickets to sporting events

• Concert or theatre tickets

• Movie vouchers

• Restaurant meals

Even if the value is under $300:

• They are not tax deductible

• GST credits cannot be claimed

• They may still trigger FBT, depending on the circumstances

ATO classification: Entertainment benefits

An Example:

A professional services firm gave each employee a $150 department store gift card and a handwritten thank-you note.

✔️ Fully deductible

✔️ No FBT

✔️ GST credits claimed

This is a textbook example of a compliant, tax-effective Christmas gift.

🎉 Christmas Parties – What Changes?

Christmas parties are treated differently depending on where they’re held, who attends, and how much they cost.

🏢 On-Premises Christmas Parties

If the party is:

• Held at your workplace

• During a normal working day

• For employees only

Then generally:

• ✔️ No FBT applies

• ❌ The cost is not tax deductible

• ❌ GST credits are not claimable

🍽️ Off-Site Christmas Parties (Restaurants, Venues)

If held off-site:

• The $300 per head rule becomes important

• If under $300 per employee, it may qualify as a minor benefit, meaning no FBT

• However, the expense is still:

  • ❌ Not tax deductible

  • ❌ No GST credits

An Example: A small business hosted a $95-per-head lunch at a local restaurant for staff and their partners.

• Employees: under $300 → no FBT

• Associates (partners): not employees → different rules apply

• Entire cost: not deductible

• No GST credits

The business assumed “under $300 = deductible” — a very common misconception.

Associates Matter More Than You Think

Associates (partners, spouses, family members) change the tax outcome.

Costs relating to associates:

• Are not deductible

• Do not qualify for GST credits

• May still fall under minor benefits for FBT purposes, but must be assessed separately

This is often overlooked when businesses host inclusive Christmas events.

Another Example:

The Mixed Event Confusion

A company hosted a combined staff Christmas party and client networking event.

• Staff portion: entertainment, not deductible

• Client portion: entertainment, not deductible

• Drinks and catering: still entertainment

• No clear cost breakdown → entire event treated conservatively

A lack of clear separation made the tax treatment far less favourable than expected.

⚠️ Common December Mistakes We See Every Year

• Assuming “under $300” means fully deductible

• Claiming GST credits on entertainment expenses

• Treating gift vouchers and event tickets the same

• Forgetting associates change the outcome

• Not keeping clear records of who attended and why

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📚 What the ATO Says (Reference Guidance)

The ATO provides guidance on:

• Fringe Benefits Tax – Minor Benefits Exemption

• Entertainment expenses

• GST treatment of entertainment

• Employee vs associate benefits

Relevant ATO resources include:

• ATO – Fringe benefits tax and Christmas parties

• ATO – Entertainment expenses

• ATO – Minor benefits exemption

• ATO – GST and entertainment

(We recommend reviewing current ATO guidance each year, as interpretations and thresholds can change.)

Christmas staff expenses are one of the most misunderstood areas of small business tax. With a bit of planning, you can:

• Reward your team

• Stay compliant

• Avoid unexpected FBT or GST issues

• Make informed decisions that suit your cashflow

If you’re unsure whether a planned expense is deductible or could trigger FBT, it’s always best to check before you book or purchase. As always, the team at MJA Business Solutions is here to help.