Can I Claim a Tax Deduction For Buying Christmas Gifts for My Employees?

Can I Claim a Tax Deduction For Buying Christmas Gifts for My Employees?

The festive season is a great time to show your staff appreciation. Many business owners like to give Christmas gifts, but a common question arises: are these gifts tax-deductible?

The answer depends on the type of gift, its cost, and whether Fringe Benefits Tax (FBT) applies.

Non-Cash Gifts And The Minor Benefits Exemption

If you provide non-cash gifts such as hampers, wine, or vouchers, these may fall under the “minor benefits exemption” for FBT purposes, provided they cost less than $300 (including GST) per employee. Under this exemption, you won’t pay FBT, but the downside is that if the gift is classified as entertainment, it is not tax-deductible, and you can’t claim GST credits.

The following is a guide to potential gifts you can provide your employees with this festive season. Anything outside this list should be discussed with your accountant before purchase to avoid accidental FBT incursions.

If you’re not 100% sure if a gift would be subject to a tax deduction, if the gift is under $300 (whether it is deemed as entertainment or non-entertainment), a conversation with a tax adviser could be in your best interest.

Gifts Over $300

Once the value of a gift exceeds $300, it no longer qualifies for the minor benefits exemption. This means the gift could attract FBT, but it can also be tax-deductible, and you can claim GST credits. While this may sound like a reasonable trade-off, the FBT liability often outweighs the benefit of the deduction.

Cash Bonuses Vs Gifts

Cash or gift cards that operate like cash are treated differently. They are always considered taxable income for the employee, reported through payroll, and subject to PAYG withholding and superannuation. For the employer, these are deductible expenses and GST is not relevant.

What’s the Best Approach?

Keeping employee gifts under the $300 threshold is usually the simplest way to show appreciation without creating additional tax obligations. For larger gestures, it’s often worth considering whether paying a cash bonus through payroll might be more efficient and transparent.

Christmas gifts are a thoughtful way to recognise your team’s contribution, but it pays to understand the tax rules before you start wrapping. The key is balancing generosity with compliance, ensuring your gifts leave employees smiling without leaving your business with an unexpected tax bill.

Need clarity on Christmas gifts and tax? Every business is different, and the right approach depends on your circumstances. Before you finalise gifts or bonuses, let’s review your options together so you can reward your team without triggering unwanted tax surprises.

Get in touch today to discuss the best strategy for your business before the year wraps up.