FBT and tax considerations for end-of-year parties and gifts in your business
As the end-of-year season approaches, many businesses celebrate with parties or gifts to show appreciation for their team. Before finalising your plans, it’s important to understand the potential fringe benefits tax (FBT) implications so you can avoid unexpected costs.
Understanding FBT on holiday celebrations
FBT applies when employers provide certain benefits to employees or their associates (such as family members). End-of-year celebrations often involve food, drinks, gifts or entertainment — all of which may trigger FBT depending on the circumstances.
Here are the key considerations:
- Location and attendees
- On business premises, during work hours: Food and drink provided only to current employees is usually exempt from FBT.
- Off-site events or events including associates: These may attract FBT unless the cost per person is under $300 and qualifies as a minor benefit exemption.
- Entertainment and gifts
- Employee gifts under $300 per person may be treated as minor benefits and exempt from FBT.
- Gifts valued over $300 are generally subject to FBT.
- Gifts to clients are not subject to FBT and may be tax-deductible (if they are not entertainment).
- Inviting clients
You won’t pay FBT on costs relating to clients attending your event. Only the portion relating to employees or their associates is included in FBT calculations.
Calculating the taxable value of entertainment
Businesses can choose from several methods to value entertainment benefits for FBT purposes:
Actual value method
You calculate the actual cost of entertainment provided to employees and their associates.
If clients also attend, you apportion the costs — only the employee portion is subject to FBT.
50/50 split method
Common where you hire or lease entertainment facilities (e.g., corporate boxes, function rooms).
Under this method, 50% of total costs are subject to FBT regardless of who attended.
Meal entertainment valuation
For meal-only entertainment (without recreational activities), you may use:
- the 50/50 split method, or
- the 12-week register method, where you track meal entertainment costs over a set period.
Both approaches consider all meal entertainment expenses for the entire FBT year.
Important considerations
Accurate record keeping
Keep detailed records of:
- total expense amounts
- per-person costs
- attendee categories
- valuation methods used
This supports correct FBT calculations and compliance.
Tax deductions and GST credits
If an event or gift is exempt from FBT, you generally cannot claim:
- an income tax deduction, or
- GST credits
Factor this in when budgeting for celebrations.
Gifts to clients
Client gifts are not subject to FBT.
A tax deduction may be available for non-entertainment gifts, such as hampers, flowers or wine intended for personal enjoyment.
Final thoughts
Understanding FBT and tax rules for end-of-year parties and gifts helps your business celebrate without unexpected tax liabilities. When in doubt, speaking with your tax adviser can provide clarity and peace of mind.