Christmas Tax Deductions: What Businesses Can and Can’t Claim

Future Accounting
Dec 19
4 min read

What every Australian business needs to know about Christmas Tax Deductions

Christmas is the perfect time to reward your team and strengthen client relationships. However, when it comes to Christmas tax deductions, many Australian businesses unknowingly make costly mistakes. Between gifts, parties, GST and Fringe Benefits Tax (FBT), the rules can quickly become confusing.

The good news is that with the right structure and understanding, you can stay compliant with the ATO while still making the most of your Christmas spending. This guide breaks down what you can and can’t claim, and where FBT may apply.

Understanding Christmas tax deductions in Australia

Not all Christmas expenses are treated equally for tax purposes. The ATO draws two critical distinctions:

Entertainment vs non-entertainment
Benefits provided to employees vs clients

These classifications determine whether an expense is tax-deductible, eligible for GST credits, and subject to FBT.

Christmas gifts and tax deductions for clients

Non-entertainment gifts provided to clients are generally tax-deductible and eligible for GST credits. These gifts are viewed as marketing or relationship-building rather than entertainment.

Examples of deductible client gifts include:

Hampers
Bottles of wine or spirits
Chocolates
Gift baskets
Flowers
Branded merchandise
Toys or gadgets

Entertainment-style gifts such as event tickets are not deductible and do not attract GST credits.

Gifts to employees and the $300 minor benefits rule

Non-entertainment gifts provided to employees can be deductible and GST-claimable, provided they fall under the minor benefits exemption.

To qualify:

The gift must be non-entertainment
The cost must be under $300 (including GST) per employee
The benefit must be provided infrequently

Common examples include:

Gift cards
Hampers
Wine or spirits
Perfume
Store vouchers
Other non-entertainment goods

If the cost exceeds $300, the gift may still be deductible and GST-claimable, but FBT will apply.

What you can’t claim

Entertainment Gifts

Where a gift is classified as entertainment, it is generally not tax-deductible and not eligible for GST credits, regardless of whether it is given to an employee or a client.

Examples include:

Movie tickets
Concert tickets
Sporting event tickets
Theatre tickets
Dining vouchers for dine-in experiences

Entertainment benefits provided to employees may still attract FBT, even though no deduction or GST credit is available.

Work Christmas parties and tax treatment

Christmas parties are generally considered entertainment.

If held off business premises:

Not tax-deductible
No GST credits available
FBT may apply if the cost exceeds $300 per head

If held on business premises on a working day:

No tax deduction
No GST credits
Usually exempt from FBT

Christmas parties for clients

Entertaining clients is always treated as entertainment by the ATO.

As a result:

Not tax-deductible
No GST credits
No FBT applies

The ATO is very clear that client entertainment is never deductible.

When does fringe benefits tax apply?

FBT may apply when employees or their associates (such as spouses) receive benefits that exceed the minor benefits threshold or are classified as entertainment.

FBT can apply to:

Employee Christmas parties costing $300 or more per person
Entertainment gifts to employees
Non-entertainment employee gifts over $300

FBT does not apply when:

The minor benefits exemption applies
The event is held on business premises on a working day
Benefits are provided solely to clients

Summary table: Christmas tax treatment at a glance

Expense	Deductible	GST Credit	FBT Applies
Client gifts (non-entertainment)	Yes	Yes	No
Client entertainment	No	No	No
Employee non-entertainment gifts under $300	Yes	Yes	No
Employee non-entertainment gifts over $300	Yes	Yes	Yes
Employee entertainment gifts under $300	No	No	No
Employee entertainment gifts over $300	No	No	Yes
Employee Christmas party under $300 per head (off-premises)	No	No	No
Employee Christmas party over $300 per head (off-premises)	No	No	Yes
Christmas party for clients	No	No	No

What happens if FBT applies?

When a Christmas gift or event is subject to FBT:

The benefit must be reported in your FBT return
FBT is taxed at the top marginal rate of 47 percent

In some cases, you may be able to:

Claim a tax deduction
Claim GST credits

However, the FBT cost often outweighs any tax benefit, making careful planning essential.

Final thoughts

The key to getting Christmas tax deductions right is understanding:

The difference between entertainment and non-entertainment
Whether the benefit is provided to employees or clients
The importance of the $300 minor benefits threshold

Planning ahead can help you reward your team, strengthen relationships, and stay compliant with the ATO, without unexpected tax surprises.

If you would like guidance on structuring your Christmas spending or reviewing your tax position, speak with our team to ensure everything is handled correctly.

Disclaimer  

This article does not constitute financial advice and is for general information only. It does not take into account any individual’s personal objectives, situation or needs, and is not intended as professional advice. Any similarity to an individual’s personal circumstances and the examples provided in this article is purely coincidental. Any person acting upon such information without receiving specific advice, does so entirely at their own risk.  

Authorisation under an Australian Financial Services Licence (AFSL) is not required in the provision of this article and the author plus Future Accounting Group Pty Ltd is not acting in its capacity as an Australian Financial Services Licence holder 

Liability limited by a scheme approved under professional standards legislation.