Christmas is a time for giving, but the question around the tax deductibility of Christmas Gifts remains a source of confusion for client. This guide breaks down what’s deductible, following critical business gift tax rules, and how to maximize your tax benefits.
Understanding Business Gift Tax Rules
Before giving gifts, it’s essential to understand the Australian Tax Office (ATO) rules for business gifts.
The ATO categorises gifts as either entertainment or non-entertainment, directly impacting tax deductibility and Fringe Benefits Tax (FBT).
Let’s explore these categories and how to navigate them.
Entertainment Gifts and Their Tax Implications
Entertainment gifts, such as movie tickets, restaurant vouchers, golf days, or show tickets, are generally not tax deductible. You cannot claim back GST for these expenses on your BAS.
However, entertainment gifts under $300 can avoid FBT if they’re provided infrequently.
Interestingly, the ATO has no definition of ‘Infrequent’. We understand that to be about twice per year.
That makes these a possible option for end-of-year staff rewards — just keep them occasional and modest.
Non-Entertainment Gifts: The Best for Tax Deductions
Non-entertainment gifts like flowers, gift hampers, wine, perfume, massage voucher, or department store vouchers under $300 are the most tax-effective choice.
And be caught out. This must be UNDER $300. So $299 qualifies and $300 costs you a lot of tax!
These are fully tax-deductible, and if you’re GST registered, you can claim the GST.
Moreover, these gifts don’t attract FBT, making them the ideal choice for business Christmas gifting.
Avoid Large Gifts Over $300
Gifts over $300 will attract Fringe Benefits Tax, which is costly. For example, a $500 gift to an employee could incur an FBT liability of around $450, almost doubling the cost of the gesture!
It’s best to avoid such large gifts to minimise your tax burden.
Business Gift Tax Rules and Family Members
When family members work in your business, special care is required. Gifts to family are not deductible if motivated by personal relationships rather than employment.
Treat family employees like other staff, ensuring any gifts are genuine business expenses — not personal presents claimed through the business.
Key Takeaways
- Entertainment gifts are not tax deductible.
- Non-entertainment gifts under $300 are tax deductible, and GST is claimable.
- Gifts over $300 attract costly FBT.
- Follow business gift tax rules to ensure compliance, especially when gifting family members.
Conclusion: Keep It Festive and Stay Compliant
Following ATO guidelines helps you maximise your Christmas deductions while avoiding costly FBT traps.
Choose your gifts wisely — keep them under $300, non-entertainment, and infrequent — so your generosity benefits both your team and your bottom line.
Need Help with Christmas Gift Tax Rules?
If you’re unsure how the ATO’s business gift rules apply to your situation, we can help.
👉 Book a Meeting with one of our business tax experts, or Checkout our Free Guides for more end-of-year tax planning tips.
