Christmas Parties, Gifts and Bonuses: FBT and Tax for Small Business

Most small business Christmas parties and gifts can be free of fringe benefits tax (FBT) if you keep them under $300 per person. The catch is that "FBT-free" usually also means "not tax-deductible". Here's how the rules work for the 2026 festive season, including the parts that catch employers out: partners at the party, the taxi home, gift cards and Christmas bonuses.

The short answer

• Party on your business premises, on a working day, for employees: no FBT, but no tax deduction or GST credits.
• Party anywhere costing less than $300 a head: generally no FBT (the minor benefits exemption), but no tax deduction or GST credits.
• Party costing $300 or more a head: FBT applies to employees and their partners, but you can claim a deduction and GST credits.
• Gift hamper, wine, flowers or a gift card under $300: generally no FBT, and you can claim a deduction and GST credits.
• Entertainment gift under $300 (movie, concert or sports tickets): generally no FBT, but no deduction or GST credits.
• Cash bonus: wages, not a fringe benefit. PAYG withholding and super apply, and it is deductible.

FBT is charged at 47% of the grossed-up value of a benefit, so getting this wrong is expensive. The FBT year runs from 1 April to 31 March, so a December 2026 party falls in the year ending 31 March 2027.

Christmas parties

The ATO treats a staff Christmas party as entertainment. Whether FBT applies depends on where it is held, who attends and how much it costs per person.

A party on your business premises

Food and drink provided to employees on your business premises on a working day is exempt from FBT, whatever it costs. The trade-off is that you can't claim an income tax deduction or GST credits for it.

A party at a restaurant or venue

Off-site, the question is whether the cost per person is under $300 (including GST). Work out the cost per head by dividing the total cost of the party by the number of people attending. If it is under $300 and staff parties are infrequent, the minor benefits exemption generally applies, so there is no FBT, and again no deduction or GST credits.

If the cost is $300 or more per head, FBT applies for each employee and partner who attends. You can then claim a tax deduction and GST credits for those costs.

Partners and family

Employees' partners and family members are their "associates". At an on-premises party, the premises exemption only covers employees, so the minor benefits test (under $300 a head) decides whether there is FBT on the cost for partners. At an off-site party, employees and partners are treated the same way.

Clients and suppliers

There is no FBT on the cost of entertaining clients, but you can't claim a tax deduction or GST credits for their share either.

Taxis and rideshare home

Taxi travel that starts or ends at an employee's place of work is exempt from FBT, so a taxi home from a party held at your premises is covered. For a party at a venue, the taxi is a separate benefit and is generally exempt as a minor benefit if it costs less than $300.

Keep a simple record for each event: date, venue, who attended (employees, partners, clients) and the total cost. It is all you need to show the cost per head, and to split it between staff and clients.

Christmas gifts for staff

Gifts are tested separately from the party. A gift given at a party that costs under $300 doesn't count towards the party's per-head cost, and each can be a minor benefit in its own right.

Non-entertainment gifts

Hampers, bottles of wine, flowers, gift cards and vouchers are non-entertainment gifts. Under $300 each, they are generally exempt from FBT as a minor benefit, and you can claim a tax deduction and GST credits. That makes them the most tax-effective way to say thank you.

Entertainment gifts

Tickets to the movies, theatre, concerts or sport, and holiday or experience vouchers, are entertainment. Under $300 they are generally exempt from FBT, but you can't claim a deduction or GST credits.

Gifts to clients

FBT doesn't apply to clients. A non-entertainment gift such as a hamper or a bottle of wine, given to keep the business relationship going, is generally tax-deductible, with GST credits. An entertainment gift, such as tickets or a dinner, isn't deductible.

Christmas bonuses

A cash bonus is wages, not a fringe benefit, so it is deductible to the business and there is no FBT. It does bring payroll obligations:

• PAYG withholding: withhold tax from the bonus using the ATO's method for bonuses and back payments (your payroll software does this), and report it through Single Touch Payroll.
• Super: most bonuses, including Christmas bonuses, count towards super, so 12% super guarantee applies.
• Payday Super: since 1 July 2026, super must reach the employee's fund within 7 business days of payday. That includes super on a bonus paid in a special pay run before Christmas. See Payday Super: is your payroll ready?.

If you are a sole trader, you are not your own employee, so there is no FBT or super guarantee on what you spend on yourself, and no deduction either.

A worked example

A café with 8 employees takes staff and their partners (16 people) to a restaurant for $140 a head, gives each employee a $90 hamper, and pays each employee a $500 bonus.

1. Dinner, $2,240: under $300 a head, so generally no FBT as a minor benefit. Not deductible, and no GST credits.
2. Hampers, $720: non-entertainment gifts under $300, so no FBT. Deductible, and the café can claim $65.45 in GST credits.
3. Bonuses, $4,000: wages. PAYG withheld and reported through Single Touch Payroll, fully deductible, and $480 of super (12%) paid to the employees' funds within 7 business days.

Had the dinner cost $320 a head instead, FBT would apply to the whole cost of the dinner, but the café could then claim a deduction and GST credits for it.

Planning tips

• Hold the party on your premises on a working day if you want the simplest FBT result.
• Off-site, budget to stay under $300 a head, including drinks.
• Choose non-entertainment gifts (hampers, wine, vouchers) over tickets: they are deductible.
• Pay cash bonuses through payroll and pay the super within 7 business days.
• If you use the 50/50 split method for meal entertainment, the rules differ. Talk to us before the party.

Not sure where your business stands, or need help with your FBT return? Our business accountants can review your festive season spending and set up your payroll for bonuses. For the wider rules, see our guide to entertainment fringe benefits tax.