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FBT and Tax Considerations for End-of-Year Parties and Gifts

As the festive season approaches, many businesses are preparing to host end-of-year parties and reward employees with gifts. While celebrations are an important way to recognise team achievements, it’s equally important to understand the Fringe Benefits Tax (FBT) implications that may arise.

The ATO has firm rules around entertainment benefits, minor benefits, client attendance, and the tax deductibility of gifts. Getting it right can mean the difference between FBT-free festivities or unexpected tax costs.

Below is a comprehensive guide to help you plan tax-effective Christmas parties and gifts for employees and clients.

FBT on Christmas Parties: When Is the Party Exempt?

Location and Attendees Matter

Your FBT liability largely depends on where the party is held and who attends.

A Christmas party is generally exempt from FBT if:

It is held on business premises,
During a working day, and
Attended only by current employees.

In this case, the cost of food and drinks is not subject to FBT even if the spend per head is high.

Minor Benefits Exemption (under $300 per person)

If your party is off-site or includes employees’ associates (partners or family members), it may still be FBT-free if:

The cost per person is under $300, and
The benefit is considered “infrequent” and “minor”.

This minor benefits exemption is one of the most important tools for planning tax-efficient staff celebrations.

Gifts and Entertainment: How They Are Taxed

Gifts Under $300 — Often FBT-Free

Providing gifts at the party or separately during the festive season can also be FBT-exempt if:

The value is less than $300,
The gift is provided infrequently, and
It is not tied to a salary-packaging arrangement.

Common FBT-free staff gifts under $300 include:

Gift hampers
Wine or gourmet food
Flowers
Retail gift cards

Gifts Over $300 — FBT Applies

Once a gift exceeds the $300 threshold, FBT is typically payable — even if the gift is a one-off.

Entertainment Gifts — Special Rules Apply

If the gift is recreational, such as:

Concert tickets
Movie vouchers
Sporting events
Theme park passes

then no income tax deduction or GST credit can be claimed, even if the gift is FBT-exempt.

Inviting Clients: No FBT on Client Costs

Costs relating to clients attending your event whether a party, dinner, or function are not subject to FBT.

However,

You cannot claim a tax deduction for entertainment provided to clients, and
You cannot claim GST credits for these expenses.

Still, inviting clients does not increase your FBT bill.

How to Calculate FBT on Parties and Meals

When entertainment is provided to employees, the ATO offers several methods for working out the taxable amount.

Actual Cost Method

You calculate FBT based on the actual cost of food, drinks, and entertainment provided to employees and their associates.
If clients or contractors attend, their costs must be apportioned out.

Example:
If a restaurant dinner includes employees and clients, only the employee-related portion is subject to FBT.

50/50 Split Method

If you hire or lease entertainment facilities (e.g., function rooms), you may choose the 50/50 split method.

50% of all entertainment costs are subject to FBT.
The other 50% remains non-deductible entertainment.

This method simplifies record-keeping but is not always the cheapest option.

Meal Entertainment Valuation

For meals without recreation (e.g., a dinner only), you can use:

the 50/50 split method, or
the 12-week register method, which calculates the taxable portion of total meal entertainment across a sample period.

Important Considerations for Employers

Record-Keeping

Maintain detailed records including:

Total costs and per-person costs
Attendee lists (employees vs clients vs associates)
Calculation methods used
Whether gifts qualify for minor benefits
Number of entertainment events provided annually

Good records protect you during any ATO review.

Claiming Deductions and GST Credits

If your Christmas party or staff gift is exempt from FBT, you generally cannot claim:

income tax deductions, or
GST credits.

This is a key misconception for many businesses.

Gifts to Clients

Client gifts are:

Not subject to FBT, and
Tax-deductible, provided the gift is not “entertainment.”

Examples of deductible client gifts:

Christmas hampers
Branded corporate gifts
Wine or whisky
Books

Not deductible:

Tickets to concerts
Sporting events
Meals or drinks with clients (these are entertainment, not gifts)

Christmas Party Scenarios (ATO-Style Examples)

Example 1: High-Cost On-Premises Party (FBT-Exempt)

A law firm hosts an employee-only Christmas celebration in the office garden on a Friday afternoon.
The event includes a marquee, live band, premium drinks and a banquet prepared by a celebrity chef.

Cost per person: $490
FBT outcome: Exempt (on business premises, working day, employees only)

Example 2: Off-Site Party Under $300 Per Person

An electrical company hosts its Christmas party at a local restaurant.
10 employees and 10 partners attend , total 20 people.

Total cost: $5,000 ($250 per person)
FBT outcome: Exempt under the minor benefits rule

Final Thoughts: Plan Early & Keep Good Records

The end-of-year season is a perfect time to reward staff and celebrate business success, but it should be done tax-smart.

To avoid FBT surprises:

Choose the right event location
Track per-person costs
Apply the minor benefits exemption correctly
Understand gift rules
Maintain clear records

With careful planning, your business can enjoy a festive season that’s both meaningful and tax efficient.

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The material on this page and on this website has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained on this page and on this website is General Advice and does not take into account any person’s particular investment objectives, financial situation and particular needs.

Before making an investment decision based on this advice you should consider, with or without the assistance of a securities adviser, whether it is appropriate to your particular investment needs, objectives and financial circumstances. In addition, the examples provided on this page and on this website are for illustrative purposes only.

Although every effort has been made to verify the accuracy of the information contained on this page and on this website, Camden Professionals, its officers, representatives, employees, and agents disclaim all liability [except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained in this website or any loss or damage suffered by any person directly or indirectly through relying on this information.

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Fringe Benefits Tax and Company Vehicles

Understand how Fringe Benefits Tax (FBT) applies to company vehicles, exemptions, record-keeping, and car parking benefits so your business stays compliant .

Fringe Benefits Tax and Company Vehicles: Key Rules for Employers

Company cars remain one of the most common benefits employers provide, but they often come with a significant tax cost. When a company vehicle is available for an employee’s private use, it generally creates a Car Fringe Benefit, which is subject to FBT at 47%.

When a Car Fringe Benefit Exists

A car fringe benefit arises when a car is held by an employer—meaning it is owned, leased or under a genuine novated lease—and is available for an employee’s private use.

What Counts as a Car?

A “car” for FBT purposes includes motor-powered road vehicles designed to carry:

Less than one tonne, and
Fewer than nine passengers

This includes:

Sedans and station wagons
Panel vans and utilities (under one tonne capacity)
Goods vehicles and passenger vehicles under the thresholds
Four-wheel drive vehicles meeting these specifications

Motorcycles and vehicles designed to carry one tonne or more are not classified as cars.

When Is a Car Considered Available for Private Use?

Private use includes:

The car being garaged at the employee’s home (automatically private use)
The employee having permission to use the car privately
Any non-business travel, including minor personal trips

If a company vehicle is available for any private use, an FBT liability is likely.

FBT Exemptions for Company Cars

Some vehicles or circumstances may qualify for exemption:

Electric Vehicle Exemption

EVs may be exempt if:

They are eligible zero or low-emissions vehicles
They cost below the luxury car tax (LCT) threshold for fuel-efficient vehicles
- $91,387 for 2024–25 and 2025–26

Work-Related Travel Exemption for Certain Vehicles

Some vehicles are exempt where private use is strictly limited. These include:

Taxis
Panel vans
Utes and vans under one tonne not designed mainly for passengers

To qualify, private travel must be minimal and meet ATO guidelines, such as:

No more than 1,000 km private use per year
No private trip over 200 km return
Home-to-work trips with no more than a 2 km detour
Vehicle value must be below the LCT threshold
The vehicle must not be provided under salary packaging

Employers should have a policy limiting private use and evidence that employees comply.

Record-Keeping Requirements

To support your FBT calculations, employers should ensure:

A valid logbook is maintained (if using the operating cost method)
Odometer readings are taken at 31 March each year
Evidence is kept demonstrating limited private use for exemption claims
Policies and employee declarations are documented
Proper records help avoid FBT penalties and incorrect assessments.

How to Calculate FBT on Company Cars

You can choose the method that results in the lowest taxable value.

Statutory Formula Method

Applies a flat 20% statutory rate to the car’s base value.
The base value includes:

Original cost
GST and delivery costs
Non-business accessories

It excludes registration, stamp duty and trade-ins.

Operating Cost (Logbook) Method

FBT is calculated on:
Total operating costs × Private use % – Employee contributions

Operating costs include:

Fuel
Maintenance
Depreciation (deemed)
Interest (deemed)

This method often benefits high-use business vehicles.

Car Parking Fringe Benefits

Employers may also incur FBT on car parking provided to employees.

A car parking fringe benefit occurs when:

The employee parks at or near the workplace
Parking is within 1 km of a commercial station charging above the FBT threshold
The car is parked for more than 4 hours between 7am and 7pm
The employee drives between home and work at least once

Car Parking FBT Exemptions

You may be exempt if:

The Employee Has a Disability

They must have a valid accessibility permit and legal entitlement to disability parking.

You Are a Small Business

You qualify if:

You are not a government body or public company
Your turnover is under $50 million, or gross income is under $10 million
Parking is not provided in a commercial car park

You Are an Exempt Employer

Such as:

Registered charities
Public benevolent institutions
Not-for-profit hospitals
Public ambulance services
Public educational institutions

Minor Benefits Exemption

If provided infrequently and valued under $300, it may be exempt.

Conclusion

Company vehicles can provide valuable benefits to employees but they also create significant Fringe Benefits Tax obligations. Understanding when a car or parking benefit triggers FBT, what exemptions apply, and which calculation method minimises your liability is essential for compliance.

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Small Business Planning for End of 2025 – Xmas Guide

The Christmas season is one of the busiest and most important times of the year for business owners. For some, it means record sales and long trading hours; for others, it means closing the doors for a well-deserved break. Either way, the lead-up to Christmas brings unique financial and operational challenges.

If you’re not prepared, it’s easy to feel the pressure of juggling cash flow, payroll, stock, compliance, and staff expectations all at once. But with the right planning, you can head into the holiday season with confidence, knowing your business is in good shape and the new year won’t start with financial stress.

Cash Flow

The festive season can stretch cash flow to its limits. Between BAS and PAYG in November, staff wages and leave in December, and potentially reduced income if your business shuts down, money can tighten quickly.

The best strategy is to build a forward-looking cash flow forecast. Map out your income and expenses from November through February. Include extra costs like staff bonuses, holiday parties, and client gifts. If revenue dips, consider delaying major purchases and trimming non-essential expenses.

Chase overdue invoices early, and if needed, negotiate flexible payment terms with suppliers. A few proactive conversations now can make a big difference.

Plan Payroll and Staff Leave Early

Payroll mistakes or unclear leave policies can derail even the best-laid plans. December often involves complex rosters, bonus payments, and penalty rates—so get organised early.

Confirm leave requests and communicate roster expectations. If payroll coincides with a public holiday, notify your team about any early payments. For businesses staying open, clarify who’s working and who’s covering shifts. Process bonuses well ahead of time to avoid clashes with year-end obligations.

Also, check that pay rates, leave loading, and entitlements align with awards or agreements to avoid compliance issues.

Stocktake and Supplier Management

For some industries, December is the busiest time; for others, it’s the quietest. Align your stock and supplier plans accordingly.

Conduct a stocktake to identify what’s moving and what’s not. If December is your peak period, order early and factor in supplier closures. If business slows, avoid overstocking to preserve cash. Running a clearance or holiday promotion can help move old stock and boost cash reserves.

Keep suppliers in the loop about your trading hours and ask for theirs to avoid missed deliveries or service disruptions.

Compliance

Tax and super obligations don’t pause for the holidays. Missing a January or February deadline can disrupt your momentum going into the new year.

Check that all BAS, PAYG, and superannuation lodgements are up to date before you close. Ensure your Single Touch Payroll is current and clarify any early January deadlines with your accountant.

Now is also a good time to consider some proactive tax planning—such as prepaying expenses, making additional super contributions, or reviewing your business structure—before 2026 begins.

Christmas Parties and Staff Gifts

Celebrating your team’s hard work is a great tradition, but without a plan, the costs can add up quickly.

Set a realistic budget for parties, gifts, and client thank-yous—and stick to it. Small, thoughtful gestures can be just as meaningful as expensive gifts. Also, ensure these expenses are correctly recorded in your books, as not all will be tax-deductible.

Protect Your Business While You’re Away

A closed business or empty premises can be vulnerable during the holidays. In addition to physical security, be mindful that cybercrime often increases over the break.

Check your insurance coverage—including business interruption, cyber insurance, and public liability. Back up critical data, update passwords, and enable multi-factor authentication. If shutting down for the holidays, turn off non-essential utilities and double-check security measures.

Conclusion

The holiday season brings both opportunities and challenges—but with thoughtful planning, you can make the most of the festive period while setting your business up for a smooth start to 2026. From managing cash flow and compliance to caring for your team and securing your operations, the steps you take now will pay off in peace of mind and stronger performance in the new year.

Start early, stay organised, and remember: a well-prepared business is one that can truly enjoy the holidays.

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Buying a Car for Business in Australia – Tax Write-Off Guide (2025)

Buying a car for business use can offer valuable tax deductions—but it’s not always straightforward. Understanding the rules around vehicle tax write-offs, depreciation, and GST is crucial to ensure compliance and maximise your savings.

What Is a Business Car Tax Write-Off?

A tax write-off reduces your taxable income by accounting for eligible business-related expenses. For business vehicles, the ATO allows you to claim:

Purchase costs (up to limits)
Running expenses (fuel, insurance, servicing)
Depreciation (if applicable)

Car Limit (2024–25)

$20,000 threshold for instant asset write-off (for eligible small businesses)
$69,674 car limit for claiming GST credits (max GST claim is $6,334)

Eligibility Checklist

To qualify for a car write-off:

Business Use Must Exceed 50%
Accurate Records Required – Keep a detailed logbook and receipts
Choose an ATO-Approved Method:
- Logbook Method: Actual business-use % of all expenses
- Cents per Kilometre: 85c/km (up to 5,000 km/year), for sole traders/partnerships only

Impact of Business Structure

Structure	Claim Method	Notes
Sole Trader/Partner	Logbook or cents per km	Simpler but limited at high mileage/income
Company/Trust	Actual expenses only	Cannot use cents/km; may attract Fringe Benefits Tax (FBT) if car is used privately

Depreciation Methods

Instant Asset Write-Off (Under $20,000)

Full deduction in the year of purchase (if car cost < $20,000 and business use is >50%)

General Depreciation Pool (Over $20,000)** Small Business only

15% deduction in first year
30% each year after
For larger businesses it’s depreciated over its effective life. This is 25% per annum.

Note: If using the cents per kilometre method, you cannot claim depreciation separately—it’s already built into the rate.

The ATO has imposed a car limit which is the maximum amount that can be used as a tax deduction and depreciation. For the 2024/25 financial year, the car limit is $69,674.

GST Implications

Claimable GST: Up to 1/11th of $69,674 = $6,334 (max)
Luxury Car Tax (LCT) applies if car exceeds $76,950 (fuel-efficient) or $91,387 (others)
If you sell the car later, GST is payable on the full sale price (no limit applies)

Common Mistakes to Avoid

Poor Record-Keeping: No logbook = no claim
Overestimating Deductions: Must reflect actual business use
Buying Luxury Cars for Tax Write-Off: High upfront costs, luxury car tax, and steep depreciation

Key Takeaways

Tip	Insight
Use the right method	Sole traders can use logbook or cents/km; companies must use actuals
Track everything	Maintain logbooks, receipts, and service history
Consider the full cost	Factor in fuel, insurance, depreciation—not just purchase price
Think beyond tax	A car should suit your business needs, not just tax strategies

Conclusion

Buying a car for your business can deliver tax advantages, but only if done right. Understand your structure, record usage accurately, and avoid overclaiming. Most importantly, assess whether the purchase makes economic sense for your operations—not just for your tax return.

Consult a registered tax agent or accountant before purchasing to maximise deductions and avoid compliance issues.

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Fringe Benefits Tax (FBT) 2025: Key Updates

The Fringe Benefits Tax (FBT) year-end is fast approaching and now is the time for businesses to review their obligations. Many business owners unknowingly provide fringe benefits without realising they may be liable for FBT. Failing to meet FBT requirements can lead to penalties and unnecessary tax payments.

This guide breaks down what FBT is, who needs to lodge a return, key exemptions, recent changes and how to prepare before the deadline. Don’t wait until the last moment, now is the time to get organised and ensure compliance.

What is Fringe Benefits Tax (FBT)?

Fringe Benefits Tax (FBT) is a tax that employers must pay on non-cash benefits provided to employees (or their associates, such as family members) in addition to their regular salary or wages. The FBT year runs from 1 April to 31 March, and businesses are required to lodge their FBT return and pay by 21 May if submitting directly to the ATO.

For businesses working with a registered tax agent, the deadline may be extended to 25 June if lodging electronically. However, it’s crucial to engage an accountant early to ensure all records are accurate and obligations are met on time.

Common Taxable Benefits Include:

Company cars used for personal purposes
Meal and entertainment expenses (tickets, events, corporate hospitality)
Gym memberships, lifestyle perks, or gifts
Loans or reimbursements to employees
Housing and rent assistance

If your business provides any of these benefits, you may be liable for FBT.

Who Needs to Lodge an FBT Return?

Even if no FBT is payable, businesses should still lodge a nil return to avoid audits or compliance issues. Many businesses assume they don’t need to submit an FBT return, but lodging one ensures compliance and prevents the ATO from questioning whether any benefits were overlooked.

Recent Changes & Considerations for 2025

Electric Vehicles & FBT Exemptions

The FBT exemption for eligible electric vehicles (EVs) continues to offer a significant tax-saving opportunity. Employers can provide eligible EVs to employees without incurring FBT, provided the car is:

Zero- or low-emission (battery electric, hydrogen fuel cell, or plug-in hybrid electric)
First sold after 1 July 2022
Below the luxury car tax (LCT) threshold ($89,332 for fuel-efficient vehicles in 2024-25)

However, starting 1 April 2025, plug-in hybrid electric vehicles (PHEVs) will no longer qualify for the FBT exemption. Businesses with pre-existing binding agreements, such as a purchase or lease agreement before the deadline, will still be eligible for the exemption, as long as no changes are made. Any new or modified commitments after 1 April 2025 will lose the exemption, meaning the vehicle will be subject to FBT.

Employers considering PHEVs for salary packaging should review their agreements now to ensure they meet exemption conditions before the deadline. Fully electric and hydrogen fuel cell vehicles will continue to be exempt beyond 2025.

Proposed $20,000 Entertainment Deduction

A proposal by the Liberal Party suggests a $20,000 tax deduction for business-related entertainment expenses, exempt from FBT. If passed, this could offer significant savings for small businesses and reduce compliance burdens. However, the proposal is not yet law, and its passage depends on the outcome of the next federal election. Even if passed, it would need to go through the full legislative process.

Until this is official, entertainment expenses provided to employees may still trigger FBT obligations. Businesses should track entertainment benefits carefully to avoid unexpected tax liabilities.

Common FBT Mistakes & How to Avoid Them

Not tracking entertainment expenses properly: Meals, tickets, and client events may still be subject to FBT unless explicitly exempt.
Incorrectly claiming work-related exemptions: Some items (like laptops) are only FBT-exempt if primarily used for work.
Forgetting that FBT applies to directors: If directors receive non-cash perks, the company may still owe FBT.
Not keeping records: The ATO requires businesses to maintain detailed records of benefits provided, including logbooks for company cars.

Review your records now to ensure everything is properly documented.

How to Prepare for FBT Before the Deadline

Review benefits: Identify any perks provided to employees and directors that could trigger FBT.
Check exemptions: Ensure that any work-related benefits meet the criteria for tax-free treatment.
Keep detailed records: Track vehicle use, meal expenses, and all other benefits.
Use salary packaging effectively: Structure benefits tax-efficiently to reduce FBT liability.
Lodge an FBT return: Even if no FBT is due, submitting a nil return confirms compliance.
Engage with your accountant early: With different deadlines depending on whether you use a tax agent, it’s important to prepare well in advance.
Seek professional advice: FBT is complex, and expert guidance can help businesses avoid overpaying taxes.

Stay Ahead of the FBT Deadline

As the FBT year-end approaches, businesses should review their obligations now to avoid last-minute surprises. The recent EV exemption and potential changes to entertainment deductions make it more important than ever to track benefits carefully.

If you’re unsure about your FBT obligations or want to explore tax-saving opportunities, we can help. Get in touch today to ensure you’re compliant and minimize unnecessary tax payments.

Conclusion

Fringe Benefits Tax can be complex, but with careful planning and early preparation, businesses can navigate their obligations and take advantage of potential tax-saving opportunities, such as the EV exemptions. Engaging with a professional accountant can help ensure compliance and optimize your tax position, allowing your business to minimise FBT liabilities and avoid any unnecessary tax payments.

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What can you claim as tax deductible for Xmas Parties?

As the festive season approaches, many businesses turn their attention to end-of-year celebrations, gifts, and other perks for employees. However, these seemingly cheerful expenses can raise questions when it comes to Fringe Benefits Tax (FBT) and tax deductions. How can businesses ensure they are compliant with the tax rules while making the most of potential deductions?

This article outlines how you can navigate the intricacies of FBT, particularly during the Christmas season, and offers tips to ensure that you are able to claim the right tax deductions for your business.

What is Fringe Benefits Tax (FBT)?

FBT is a tax employers pay on certain benefits provided to employees (or their associates), which are not considered part of their salary or wages. These benefits can range from Christmas gifts, to entertainment, to loans provided to staff. While these perks are designed to improve employee satisfaction, they can trigger FBT liabilities if they meet certain criteria.

The FBT is separate from income tax and applies when the benefit is provided in addition to an employee’s salary or wages. As a business owner or employer, it’s crucial to distinguish between what constitutes a fringe benefit and what qualifies for a tax deduction.

Common Christmas-Related Benefits That Could Trigger FBT

During the Christmas season, businesses typically provide several types of benefits to employees. These include:

Christmas Gifts: Many companies give Christmas presents to staff, either as individual gifts or in the form of a gift voucher. These gifts can potentially attract FBT unless they meet specific criteria.
Christmas Parties or Events: Businesses often host end-of-year parties or functions for their employees, whether it’s a sit-down dinner or an informal gathering. The costs associated with entertainment can be subject to FBT, depending on various factors such as the location, the scale of the event, and the number of employees invited.
Meal Entertainment: If meals are provided during Christmas parties or other social functions, the cost could attract FBT. This could include meals provided at restaurants, catered events, or in-office meals.
Employee Loans or Gifts of Property: In some cases, businesses might provide loans or gifts of property to employees. These benefits could trigger FBT if they are not part of a salary package.

How to Minimize FBT During the Christmas Period

While FBT can be complex, there are a few strategies businesses can adopt to minimize their exposure to the tax:

Use the $300 Exemption for Gifts

FBT allows an exemption for gifts provided to employees if the value of the gift is $300 (or less) per employee, and the gift is not related to cash or a cash-equivalent benefit (such as gift vouchers). This means that businesses can provide non-cash gifts worth up to $300 per employee without triggering FBT.

It’s important to note that the $300 exemption applies to the value of each gift, not the total amount spent per employee. If you give an employee multiple gifts that together exceed $300, the entire amount may be subject to FBT.

Host an In-House Event to Avoid FBT on Entertainment

While entertainment expenses typically attract FBT, the tax may be avoidable if the event is held on your business premises, and the food and drinks are provided in a way that is not lavish or excessive. For example, an office Christmas lunch with a modest spread is less likely to attract FBT than a lavish dinner at a high-end restaurant.

Additionally, if the event is solely for employees (and not for family members or clients), you may be able to avoid FBT altogether, especially if the cost per employee is relatively low.

Consider Using the “Minor Benefits” Exemption

FBT also includes a minor benefits exemption, which applies to benefits that are “infrequent and irregular” and have a value of $300 or less. This means that if you provide small, occasional gifts to your employees (such as a bottle of wine or a small gift card), and the value is under $300, you may not need to report or pay FBT on these benefits.

However, this exemption can be tricky if the gifts are provided frequently or as part of a regular business practice, so make sure these gifts are truly exceptional to qualify.

Plan Employee Gifts Strategically

Instead of providing multiple small gifts, consider providing one or two larger gifts within the $300 exemption limit. This strategy will help to simplify your record-keeping and ensure that you don’t accidentally exceed the threshold, triggering FBT.

Additionally, ensure that the gifts are not in the form of cash or vouchers that could easily be converted to cash, as these are more likely to be classified as “cash-equivalent benefits” and attract FBT.

Document Everything Properly

Keeping accurate records is vital to ensure that your business remains compliant with FBT regulations. For each fringe benefit provided, you must maintain clear documentation, including:

The value of each benefit provided
The recipient of each benefit
The purpose of the benefit
Any employee contributions (e.g., if they contribute to the cost of a Christmas party)

Proper documentation will allow you to identify any benefits that fall under the FBT exemptions and ensure you are paying the correct amount of tax. If you’re unsure about whether a particular gift or event is subject to FBT, consulting with a tax professional or accountant is advisable.

How to Claim Tax Deductions for Christmas Expenses

While some Christmas-related expenses may attract FBT, many businesses can still claim tax deductions for certain costs incurred during the holiday season. The key to claiming deductions is ensuring the expenses are directly related to your business operations.

For example:

Business-related Christmas Parties or Events: If the Christmas party is a legitimate business event (for example, a networking event with clients), then you can claim tax deductions for the costs associated with hosting the event, even if they are subject to FBT.
Gifts to Clients: Gifts provided to clients or customers are generally deductible as a business expense, provided they are for the purpose of promoting your business or fostering a business relationship.
Employee Gifts: If the gifts you give to employees are considered “non-fringe benefits” (such as a token of appreciation, not a reward for services), they can also be claimed as tax deductions.

Conclusion

FBT can be a complex issue for businesses during the Christmas season, especially as you plan gifts and events for your employees. However, with proper planning and attention to detail, businesses can reduce their FBT exposure and ensure that they are still able to claim legitimate tax deductions. Always keep in mind the value limits for gifts, the potential for exemptions on minor benefits, and the need for accurate record-keeping. And when in doubt, consult with a tax professional to ensure compliance and maximize potential tax benefits for your business.

By following these guidelines, you can make the most of your Christmas season expenses, ensuring both your employees and your business are taken care of while minimizing unnecessary tax burdens.

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FBT and Xmas – How to ensure you can claim tax deductions

As we are head towards the Xmas party season and end of year business activities, business owners need to consider the tax implications that relate to customer gifts, staff parties and staff end of year gifts. This article looks at some of the tax effective ways you can spend money at Xmas and claim tax deductions.

How to reward customers/ clients

Should you entertain your client or send them a gift? If you entertain your clients in any way, it’s not tax deductible and you can’t claim back the GST. There are specific rules designed to prevent deductions and GST credits from being claimed when the expenses relate to entertainment.

But, if you send your customer a gift, then that is tax deductible if there is an expectation that the business will benefit (assuming the gift does not amount to entertainment.) If you decide to reward your clients with a gift, you should consider which customers add more value and who is likely to refer future clients to you. If you clients are active on social media, why not reach out to them as ask them if you could also make a donation on behalf of your customers. Donations to deductible gift recipients (DGRs) above $2 are often tax deductible and can make an active difference to a cause.

How to reward your staff and team members

Christmas is expensive. Some businesses simply can’t afford to do much because cashflow is too tight. Expectations are high so if you are doing something then it’s best not to exacerbate cashflow problems and take advantage of any tax benefits or concessions you can.

Christmas gifts for staff | FBT & PAYG

You can provide your staff with a gift that meets the ‘minor benefit’ threshold and avoid paying FBT. $300 is the minor benefit threshold for FBT so anything at or above this level will mean that your Christmas generosity will result in a gift to the Tax Office as well at a rate of 47%. This gift must be a one off or ad hoc, so providing a monthly membership or multiple gift vouchers that are worth more than $300 will trigger a FBT event.

Gifts of cash from the business are treated as salary and wages – PAYG withholding is triggered and the amount is subject to the superannuation guarantee.

Hosting an office Xmas party – Fringe Benefits Tax

Xmas parties hosted by you for your staff are considered a ‘fringe benefit’ and you will be required to pay FBT unless you host it in the office on a workday. This way, Fringe Benefits Tax (FBT) is unlikely to apply regardless of how much you spend per person. Here are some further tips:

Taxi travel that starts or finishes at an employees workplace is FBT exempt
If you host your Xmas party outside the office, ensure you do not spend more than $300 per head to avoid paying FBT. Note that you cannot claim GST credits or tax deductions if there is no FBT payable
If entertainment is provided to employees and an FBT exemption applies, you will not be able to claim tax deductions or GST credits for the expenses
If your business hosts slightly more extravagant parties and goes above the $300 per person minor benefit limit, you will pay FBT but you can also claim a tax deduction and GST credits for the cost of the event.

Hosting Xmas parties or rewarding clients can have tax benefits for your business. You should also consider the importance that investing in clients and staff may have on your future profitability and goodwill.

The table below, sets out the rules that apply to FBT, Tax deductions and GST Credits*

*For GST registered businesses (not tax exempt) that are not using the 50-50 split method for meal entertainment.

	Exempt from FBT?	Tax deductible	GST credits
Christmas party on employer premises on a weekday
Employees	Yes	No	No
Associates of employee (spouses etc.)	If <$300 per head	If $300 or more per head	If $300 or more per head
Customers	N/A	No	No
Christmas party (employer premises on a weekend or external venue)
Employees	If <$300 per head	If $300 or more per head	If $300 or more per head
Associates (spouses etc.)	If <$300 per head	If $300 or more per head	If $300 or more per head
Customers	N/A	No	No
Christmas gifts (assuming the gift doesn’t involve entertainment)
Employees	If <$300 per head	Yes	Yes
Associates (spouses etc.)	If <$300 per head	Yes	Yes
Customers	N/A	Yes	Yes
Christmas lunch with customer at external venue
Employees	If <$300 per head	If $300 or more per head	If $300 or more per head
Associates (spouses etc.)	If <$300 per head	If $300 or more per head	If $300 or more per head
Customers	N/A	No	No

How can we help?

If you have any questions or would like further information, please feel free to give our office on 08 9221 5522 or via email – info@camdenprofessionals.com.au , or arrange a time for a meeting so we can discuss your requirements in more detail.

General Advice Warning

Camden Professionals

Fringe Benefits Tax and Electric Vehicles

The Treasury Laws Amendment (Electric Car Discount) Bill 2022 was introduced which proposes to make the provision of zero or low emissions vehicles exempt from fringe benefits tax (FBT).

The FBT exemption will apply to cars below the luxury car tax threshold for fuel efficient vehicles (currently set at $84,916 for the 2022-23 income year) which are:

battery electric vehicles
hydrogen fuel cell electric vehicles
plug-in hybrid electric vehicles.

A car that has an internal combustion engine will not be within the scope unless it is able to be fuelled by a battery that can be recharged by an off-vehicle power source (i.e., plug-in hybrid car). The benefit exempted from FBT for eligible electric cars will include any associated running costs.

Note: The exemption is restricted to cars designed to carry a load of less than one tonne and fewer than nine passengers. This Bill does not change the treatment of fringe benefits involving the use of other electric vehicles which are not cars, such as motorbikes.

Current Fringe Benefits Tax rules for Electric Cars

Under the current law, where an employer provides a fringe benefit to an employee on an electric car – ‘zero or low emissions vehicle’ – the employer is subject to FBT on the taxable value of the benefit, which is calculated using the statutory formula or on a cost basis.

New FBT exemption for Electric Cars

The proposed FBT exemption relates to car fringe benefits and will only apply to vehicles that are ‘cars’ for FBT purposes. This means that other types of electric vehicles will not qualify for the exemption, such as vehicles that can carry a load of one tonne or more, or nine passengers or more. For example, the popular ‘dual-cab ute’ may qualify for a separate FBT exemption in certain circumstances.

Generally, a car fringe benefit arises where a car is applied to or made available for private use to an employee, or an associate of an employee, by their employer.

Car benefit is exempt

Under the proposed amendments, a car benefit will be exempt if all the following conditions are satisfied:

The benefit is provided to a current employee

Although the definition of ‘employee’ in the FBT rules includes a current, future, or former employee, the amendments specifically refer to only current employees. This means the FBT exemption for electric cars will not extend to future or former employees. It is not clear why the Government have limited the exemption to only current employees.

The car is a ‘zero or low emissions vehicle’

The value of the car at the first retail sale (i.e. purchase price) was below $84,916 for 2022-23, which is the luxury car tax threshold for fuel efficient cars
The car was first held and used on or after 1 July 2022.
The benefit exempted from FBT is the private use of the vehicle, including any associated costs of running and maintaining the car for the period the car fringe benefit was provided

Tax Implications

A number of implications arise from the introduction of the Bill:

Reporting exempt car fringe benefits – Electric car fringe benefits that are exempt from FBT will still be counted towards a current employee’s reportable fringe benefits amount (RFBA). This will apply for each FBT year in which the exempt benefit is provided, as RFBAs are used to determine various liabilities and entitlements
Salary packaging arrangements – Provided the conditions for the exemption are satisfied, the exemption is available if the benefit is provided under a salary packaging arrangement. Salary sacrificing involves an employee sacrificing part of their “gross” salary towards the cost of a fringe (i.e. non-cash) benefit. Salary sacrifice arrangements work in such a manner where the individual claims a tax deduction for the amount sacrificed and the employer may then have an additional FBT liability in relation to the benefit provided. However, no further FBT is payable by the employer if the benefit provided is an exempt fringe benefit.

Effectively, the employee gets a tax deduction for the costs associated with the vehicle and the employer does not have to pay any additional FBT. Novated lease arrangements are extremely popular in relation to motor vehicles, and we expect this exemption to make them even more popular over the coming years.

Date of Effect

When the Bill becomes law, the FBT exemption will only apply to fringe benefits provided on or after 1 July 2022, for eligible electric cars that are first used on or after 1 July 2022. This means that the electric car must be first held, or owned, or otherwise made available to the employee or associate on or after 1 July 2022. It also means that the car must be first used on or after 1 July 2022 for the FBT exemption to be available. Therefore, electric cars that employers have provided to employees for their use before 1 July 2022 will not be eligible for the FBT exemption. The Bill has been referred to the Senate Economics Legislation Committee, which is due to provide its report on the Bill by 21 September 2022.

General Advice Warning

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Frequently Asked Questions

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Fringe Benefits Tax and Company Vehicles

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Fringe Benefits Tax (FBT) 2025: Key Updates

What can you claim as tax deductible for Xmas Parties?

FBT and Xmas – How to ensure you can claim tax deductions

Fringe Benefits Tax and Electric Vehicles