Christmas events and gifts – what are the tax implications?

1. Should I take clients out for lunch or send them a gift this Christmas? 

At this time of year it’s expected that you may want to give gifts to clients as a thank you for supporting your business. Gifts can also motivate customers to refer your services, and as this is in the nature of business promotion, they are generally considered to be tax deductible.

Send them a gift, but not an entertainment gift. ‘Entertainment Gifts’ are not tax deductible, and these include things like theatre, music, sporting tickets or holidays.  So just stick to bottles of wine, hampers or other goods.

The cost of entertaining clients is not tax deductible, even at Christmas.  

2. Are there FBT implications when holding a staff Christmas Party? 

No, as long as you stick to the rules.

The costs (such as food and drink) associated with Christmas parties are exempt from FBT if they are provided on a working day on your business premises and consumed by current employees.

If you hold your Christmas Party off premises i.e., in a restaurant, make sure the cost per employee (and their associates) is under $300 per head to avoid any FBT implications. 

Be aware – there is still no tax deduction for the staff Christmas Party and you also can’t claim GST credits.

3. Can I also give a gift to my employees at the Christmas Party without it being subject to FBT? 

Yes you can. As long as the gift is under $300 in value there is no FBT implications.  And see above about making sure that your gift is not an “entertainment gift” because then you won’t get a tax deduction for it.

4. Can I claim a tax deduction on Charity donations?

Yes, as long as the organisation is deductible-gift recipients (DGRs). Most major charities are.

For gifts of money, you can claim a deduction where the amount is $2 or more. You need to keep the receipt or have the credit card statement. You can’t claim a gift or donation if it provides you with a personal benefit i.e., raffle tickets, chocolates, pens, dinners. If you attend a fundraising event you may be able to claim a deduction if the amount spent is over $150. Check with your TaxAssist Accountant for more information.

5. Can I claim my airfare this Christmas if I am also conducting business whilst I am there?

If the primary purpose of your trip is for business purposes you may claim 100% of the airfare even if you spend some of that time away visiting friends and family.

Your accommodation can also be claimed as long as the work-related activity extends over at least two consecutive days. Travel and meals you eat whilst working can also be claimed, but Passports, Visas and insurance cannot be claimed. 

If you have organised to travel for business AND to catch up with relatives who live there, tax law requires you to properly apportion your costs and deduct accordingly i.e., if you stay for two weeks with family and only have one or two business meetings the business costs are considered incidental and will be harder to claim. Check with your TaxAssist Accountant for more information.

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Date published 2 Dec 2022 | Last updated 14 Dec 2022

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.