’Tis the Season for Giving… But What Can You Claim Back? Quick Guide to Christmas Gift & Entertainment Expenses

The festive season is a great time to show appreciation to your team and clients — but not all generosity is treated equally at tax time.

Whether you’re planning gifts, bonuses, or end-of-year celebrations, it’s important to understand what’s fully deductible, what’s only 50% deductible, and when payroll or GST rules apply.

Here’s a clear, quick guide to help you stay compliant while spreading some Christmas cheer.

Employee gifts

Gifts that are not subject to entertainment tax rules — such as vouchers, hampers, or flowers — are fully deductible and exempt from Fringe Benefit Tax (FBT) if they cost less than $300 per employee per quarter and stay under $22,500 a year in total for all staff.

However, gifts that do fall under entertainment rules (food hampers, wine, tickets to shows or events) are only 50% deductible and not liable for FBT.

Cash bonuses

Cash bonuses count as income, so PAYE and other payroll taxes apply. These lump-sum payments are taxed at a flat rate based on the employee’s income bracket.

Client gifts

Food, drink, and entertainment gifts are 50% deductible. Other gifts — such as flowers, books, or movie tickets — are fully deductible.

Workplace events

Christmas parties, client dinners, and team drinks are 50% deductible. Morning teas, office lunches, and charitable donations remain fully deductible.

Remember: GST adjustments apply for entertainment expenses that are only 50% deductible.

Read our popular guide to entertainment expenses here.

If you’re unsure where your festive spending fits — or want guidance on keeping your Christmas costs tax-efficient — contact us for tailored advice.