FBT on Staff Parties, Entertainment and Gifts

Original publication date: 20 November 2025 | Updated: 23 September 2026

FBT on staff parties, entertainment and gifts can apply whenever an employer provides employees or their associates with benefits outside ordinary salary and wages.

The rules are relevant for Christmas parties, end-of-financial-year functions, team celebrations, staff lunches, event tickets and employee gifts. However, there is no special fringe benefits tax rule just for Christmas. The same FBT principles apply throughout the year.

Whether FBT applies depends on what you provide, who receives it, where and when it is provided, how often similar benefits are provided and whether an exemption applies.

The $300 minor benefits exemption is often important, but spending less than $300 does not automatically make a benefit FBT-free. Employers also need to consider income tax deductions and GST credits, because entertainment can have different outcomes depending on its FBT treatment.

Quick Summary

• FBT is paid by employers on certain benefits provided to employees or their associates.
• The FBT year runs from 1 April to 31 March.
• There is no separate FBT category for Christmas parties.
• Food and drink provided to current employees on a working day and consumed on the employer’s business premises can be exempt property benefits, subject to the meal entertainment valuation method used.
• A benefit with a notional taxable value of less than $300 may qualify for the minor benefits exemption, but the exemption is not automatic.
• The $300 threshold means less than $300. A benefit valued at exactly $300 does not satisfy that threshold.
• The threshold applies to each benefit provided to an employee or associate, rather than being a single annual $300 allowance.
• A party and a separate gift can be considered separately for the threshold, although associated benefits are relevant when assessing the exemption.
• Benefits provided to clients are generally outside FBT because clients are not employees or employee associates.
• For taxpaying businesses, entertainment costs that are exempt from FBT are generally not income tax deductible. Entertainment subject to FBT is generally deductible.
• GST credits generally follow the income tax deductibility rules for entertainment expenses.
• Keep records of who attended, what was provided, where the event occurred and the cost of each benefit.

What Is Fringe Benefits Tax?

Fringe benefits tax, or FBT, is a tax employers pay on certain benefits provided to employees or their associates in connection with employment.

FBT is separate from income tax and is paid by the employer. The FBT year runs from 1 April to 31 March.

Common fringe benefits can include private use of a work car, entertainment, expense reimbursements and other non-cash benefits.

Vehicle benefits have their own rules. Cotchy’s Dual Cab Ute FBT guide explains the FBT issues that can arise when employees use certain work vehicles privately.

Does FBT Apply to Staff Parties?

It can.

There is no special category for a Christmas party, EOFY celebration or staff social event. Employers need to work through the ordinary FBT rules for the food, drink, recreation, travel and other benefits provided.

The outcome can change depending on whether the event is held on business premises or off-site, whether it occurs on a working day, whether associates attend and whether the minor benefits exemption is available.

When Is an On-Premises Staff Party Exempt from FBT?

For a taxpaying employer that is not using the 50:50 split method or 12-week register method for meal entertainment, food and drink provided to current employees can be exempt from FBT when it is provided and consumed on the employer’s business premises on a working day.

This is the exempt property benefit rule. There is no $300 limit for the employee food and drink covered by this exemption.

The exemption does not extend in the same way to an employee’s associate, such as a spouse or partner. If associates attend, their benefits need to be considered separately. The minor benefits exemption may be relevant.

Does the $300 Minor Benefits Exemption Apply to Staff Events?

Potentially.

A minor benefit can be exempt from FBT where its notional taxable value is less than $300 and, after considering the statutory criteria, it would be unreasonable to treat the benefit as a fringe benefit.

The ATO considers how infrequently and irregularly the benefit and similar benefits are provided, the value of the benefit and associated benefits, the practical difficulty of determining the value, and the circumstances in which it is provided.

This means under $300 is not a complete test by itself. Frequency, regularity and the circumstances surrounding the benefit still matter.

Is the Minor Benefit Threshold $300 or Under $300?

The statutory threshold is less than $300.

A benefit with a notional taxable value of $299 may satisfy the value test. A benefit valued at exactly $300 does not.

If the benefit does not satisfy the minor benefits exemption, that does not mean FBT applies only to the amount above $300. The taxable value is worked out under the relevant FBT rules.

Is the $300 Threshold Per Employee or Per Benefit?

The threshold applies to each benefit provided to an individual employee or associate. It is not a single $300 annual allowance for everything an employee receives.

For example, where an employer provides a staff party and also gives a separate gift, the party benefit and gift can be considered separately when applying the less-than-$300 threshold.

However, benefits provided in connection with each other can be associated benefits. Their context and value may be relevant when considering whether it would be unreasonable to treat the minor benefit as a fringe benefit.

Can a Party and Gift Both Be Exempt?

Yes, depending on the circumstances.

The ATO’s minor benefits guidance confirms that a Christmas gift and Christmas party benefit are considered separately for the threshold. If each benefit is less than $300, each can potentially qualify as a minor benefit.

The employer must still consider the other minor-benefit criteria. The fact that each benefit is below $300 does not guarantee exemption.

What Happens at an Off-Site Staff Party?

An off-site party, such as a dinner at a restaurant or event at a function venue, does not receive the same on-premises property exemption.

The employee and associate benefits may therefore be subject to FBT unless another exemption applies. For an occasional staff function costing less than $300 per benefit, the minor benefits exemption may be available if all relevant conditions are satisfied.

If the benefit is $300 or more, it cannot qualify for the minor benefits exemption under the less-than-$300 value test.

Do Partners and Spouses Create FBT?

Benefits provided to an employee’s associate, including a spouse or partner, can attract FBT.

At an on-premises working-day function, the employee’s food and drink may qualify for the property exemption while the associate’s benefit does not. The associate’s benefit should then be tested separately, including whether the minor benefits exemption can apply.

For off-site events, benefits provided to employees and their associates each need to be considered under the relevant entertainment and minor-benefit rules.

What About Clients Who Attend?

FBT generally does not apply to entertainment provided to clients because the benefit is not provided to them as employees or associates of employees.

However, no FBT does not automatically mean the expense is income tax deductible. Client entertainment is generally not deductible for a taxpaying business.

Where an event includes employees, associates and clients, keep attendance records so the different portions can be identified.

Are Staff Party Costs Tax Deductible?

The answer depends on the FBT treatment.

For a taxpaying business, the ATO states that Christmas-party entertainment costs are income tax deductible only to the extent they are subject to FBT.

Therefore, entertainment that is exempt from FBT under the minor benefits exemption or exempt property benefit rules is generally not deductible. Entertainment that is subject to FBT is generally deductible to the employer.

Client entertainment is generally not subject to FBT and is generally not income tax deductible.

Can You Claim GST Credits on Staff Entertainment?

GST credits for entertainment generally follow the income tax deductibility restrictions.

Where entertainment is not deductible because it is exempt from FBT, the business generally cannot claim GST credits for that entertainment expense.

Where entertainment is subject to FBT and is deductible, GST credits may generally be available if the ordinary GST credit requirements are satisfied.

For broader GST reporting, see Cotchy’s Business Activity Statement (BAS) guide.

How Are Employee Gifts Treated for FBT?

Employee gifts need to be classified carefully because entertainment and non-entertainment gifts can have different income tax and GST outcomes.

An infrequent gift with a notional taxable value of less than $300 may qualify for the minor benefits exemption where the other conditions are met.

Examples of non-entertainment gifts can include flowers, perfume, a bottle of wine provided as a gift rather than consumed as entertainment, or a hamper. Entertainment gifts can include tickets to concerts, theatre, movies or sporting events.

The FBT exemption analysis may be similar, but the deductibility and GST consequences can differ because entertainment expenses are subject to separate rules.

Are Non-Entertainment Gifts Under $300 Deductible?

Where an employee receives an infrequent non-entertainment gift that qualifies for the minor benefits exemption, the employer can generally claim an income tax deduction and GST credits, subject to the ordinary rules.

This is different from entertainment that is exempt from FBT, which is generally not deductible and generally does not give rise to GST credits.

What If an Employee Gift Is $300 or More?

A benefit valued at $300 or more cannot satisfy the value requirement for the minor benefits exemption.

You then need to consider whether another exemption or concession applies. If not, the benefit may be subject to FBT.

Do not treat $300 as a deductible excess where only the amount above $300 attracts FBT. The relevant benefit is valued under the FBT rules.

Are Gift Cards Subject to FBT?

A gift card provided to an employee can be a fringe benefit rather than cash salary, depending on its characteristics and how it is provided.

An infrequent gift card with a value below $300 may potentially qualify for the minor benefits exemption, subject to the full test.

Employers should distinguish a genuine non-cash gift card or voucher from a cash payment or remuneration arrangement. The terms of the card and circumstances in which it is provided matter.

Does FBT Apply to Team-Building and Recreational Activities?

Recreation provided to employees can be entertainment for FBT purposes. Examples include sporting events, golf days, theatre outings and similar recreational activities.

The minor benefits exemption may apply where an individual benefit is less than $300 and the other requirements are met. Regular or frequent recreational benefits are less likely to satisfy the exemption simply because each event costs less than $300.

What About Taxi Travel to a Staff Function?

Taxi travel has a specific FBT exemption in some circumstances.

Taxi travel provided to an employee can be exempt where a single taxi trip begins or ends at the employee’s place of work. The exemption does not extend in the same way to an employee’s associate.

Travel that is not covered by the taxi exemption may need to be considered as a separate benefit.

Importantly, the less-than-$300 threshold is applied to each benefit separately. Employers should not automatically add a taxi benefit to the party cost and treat the combined total as one benefit for the threshold. Associated benefits can still be relevant to the broader minor-benefit assessment.

Do Multiple Small Staff Events Automatically Qualify as Minor Benefits?

No.

Holding several events below $300 each does not automatically produce multiple FBT exemptions.

Frequency and regularity are expressly relevant to the minor benefits test. The more often similar benefits are provided, the less likely it may be that treating each benefit as a fringe benefit would be unreasonable.

Employers should therefore avoid treating the $300 threshold as a planning allowance that resets for every staff event.

How Do Meal Entertainment Valuation Methods Affect the Result?

Employers can use different methods to value meal entertainment, and the chosen method can affect whether some exemptions are available.

In particular, the minor benefits exemption cannot be used to reduce meal entertainment valued under the 50:50 split method. Different rules apply to the 12-week register method.

This is important because a simple party example based on the actual cost method may not produce the same result for an employer using an alternative meal entertainment valuation method.

Before applying an exemption, confirm which valuation method the business uses.

Staff Party and Gift Examples

What Records Should Employers Keep?

Good records are essential because the FBT result often depends on facts that are difficult to reconstruct months later.

• invoices and receipts
• the date and location of the event
• whether the event occurred on a working day
• attendance records separating employees, associates and clients
• cost-per-person calculations where relevant
• details and values of gifts
• the nature of entertainment provided
• records supporting any minor benefits exemption
• the meal entertainment valuation method used
• GST and income tax treatment applied in the accounts

Cotchy’s business record keeping guide covers broader record-keeping requirements for Australian businesses.

Common FBT Mistakes With Staff Parties and Gifts

• Assuming every benefit under $300 is automatically exempt.
• Treating $300 as an inclusive threshold rather than less than $300.
• Adding separate benefits together solely to test whether the $300 threshold has been crossed.
• Assuming an on-premises party is always exempt regardless of who attends, the day it is held or the valuation method used.
• Claiming a tax deduction and GST credits for entertainment that is exempt from FBT without checking the entertainment rules.
• Assuming client entertainment is deductible because no FBT applies.
• Using multiple small events to repeatedly access the minor benefits exemption without considering frequency and regularity.
• Failing to separate employees, associates and clients in attendance records.
• Treating entertainment and non-entertainment gifts as having identical tax outcomes.
• Forgetting that the FBT year runs from 1 April to 31 March.

Frequently Asked Questions

Is there FBT on staff Christmas parties?

There can be. Christmas parties do not have a special FBT category. The result depends on factors such as location, attendees, cost, valuation method and whether an exemption applies.

What is the $300 minor benefits exemption?

A benefit with a notional taxable value of less than $300 may be exempt where, after considering the statutory criteria, it would be unreasonable to treat it as a fringe benefit. The value test alone is not enough.

Does $300 per employee mean I can spend $300 FBT-free?

No. The threshold is less than $300, and the minor benefits exemption has additional conditions. It is not an automatic annual allowance.

Can a staff party and a gift both qualify for the minor benefits exemption?

Potentially. They are considered separately for the threshold, but each benefit must satisfy the relevant requirements and associated benefits can be relevant to the broader assessment.

Is an office Christmas party tax deductible?

For a taxpaying business, entertainment costs are generally deductible only to the extent they are subject to FBT. Employee food and drink that is exempt as an on-premises property benefit is generally not deductible as entertainment.

Can I claim GST credits on an FBT-exempt staff party?

Generally not where the entertainment expense is not income tax deductible. GST credit entitlement should be checked against the entertainment and GST rules.

Are gifts to employees subject to FBT?

They can be. An infrequent gift below $300 may qualify for the minor benefits exemption. The tax deduction and GST treatment can differ depending on whether the gift is entertainment or non-entertainment.

Does FBT apply to clients at a staff function?

FBT generally does not apply to client entertainment because clients are not employees or their associates. Client entertainment is generally not income tax deductible.

Is taxi travel to a staff party exempt from FBT?

A single taxi trip provided to an employee that begins or ends at the employee’s workplace can qualify for a specific exemption. Other travel needs to be considered separately.

Do several staff events under $300 each avoid FBT?

Not automatically. Frequency and regularity are relevant to the minor benefits exemption, so repeated similar benefits may be less likely to qualify.

Review FBT Before the Event, Not After It

FBT treatment is easier to manage when the business reviews an event or gift program before committing to the cost.

Check who will attend, where the event will be held, the expected cost of each benefit, whether gifts are entertainment or non-entertainment, and which meal entertainment valuation method the business uses.

Then make sure the bookkeeping reflects the correct FBT, income tax and GST treatment. The same process can be used for Christmas parties, EOFY functions, team celebrations and other staff events throughout the year.

Cotchy provides taxation services for Australian businesses that need help understanding and meeting their FBT and other tax obligations.

Accurate coding also matters. Cotchy’s bookkeeping services help keep business transactions reconciled and ready for reporting.

Sources
Australian Taxation Office – Entertainment-related fringe benefits
Australian Taxation Office – Fringe benefits tax: a guide for employers
Australian Taxation Office – Minor benefits exemption
Australian Taxation Office – TR 2007/12 Fringe benefits tax: minor benefits

Information in this article is general in nature and is correct as at 23 September 2026. FBT outcomes can depend on the employer, the benefit, the valuation method used and the circumstances in which it is provided. Check current ATO guidance or obtain professional advice for your circumstances.