‘Tis the season for Christmas parties, employee gifts and client gifts. But the tax outcomes for these things can be complicated. To help clarify what you can and can’t claim, here is a brief summary.

A Christmas party is considered providing “entertainment” to staff, which is subject to fringe benefits tax (FBT). Where FBT is paid, the cost of the entertainment benefit is deductible and the GST can be claimed on your next BAS.

If the minor and infrequent exemption applies, the FBT liability is reduced to nil. However, there is no tax deduction or GST claim allowed.

This exemption is when the cost of the benefit is less than $300 per person and the benefit is not provided frequently. Which may be applicable to your Christmas party expenses.

The provision of a gift to an employee at Christmas time may be a minor benefit and is exempt where the value of the gift is less than $300.

Giving a gift to an existing client to thank them for their business is generally considered to be a tax deduction.

If the expectation is that giving a gift will generate further business or motivate referrals, then the expense is considered to be in the nature of business promotion. Therefore, as long as the gift is not classified as entertainment, it is a tax deduction.

Christmas gifts which are not considered to be entertainment may be Christmas hampers, a bottle of wine or a gift voucher.

Some gifts, for example tickets to a sporting event or movie or a plane ticket are considered to be entertainment and FBT applies.