Updated November 2026 for the FBT year ending 31 March 2027.
A Christmas party, a team building day or a hamper for your staff is a good way to thank your team. It also raises two questions most business owners ask us at this time of year: can I claim it, and will it trigger fringe benefits tax (FBT)?
The answer depends on what you provide, who receives it, where it happens and how much it costs per person. This guide walks through the most common workplace entertainment situations using the ATO’s own examples, so you can plan with a clear idea of the tax outcome.
The short answer
In most cases, the tax outcome follows a simple pattern. If entertainment is exempt from FBT, you generally can’t claim a tax deduction or GST credits for it. If FBT applies, the cost is generally deductible, GST credits can usually be claimed, and the FBT you pay is also deductible.
Entertainment for clients sits outside FBT altogether, but it is generally not deductible either.
How the ATO decides whether something is entertainment
The ATO looks at four factors: why the food, drink or activity is provided, what it is, when it is provided and where. The first two carry the most weight.
- Why: food provided so your team can keep working points away from entertainment, while a social event for staff to enjoy points towards it.
- What: tea, coffee and simple refreshments are generally not entertainment, while alcohol or an elaborate meal usually is.
- When: during work time points away from entertainment, while after hours or on a weekend points towards it.
- Where: your premises points away from entertainment, while a restaurant, bar or venue points towards it.
Recreation, such as golf, sporting events, theatre tickets and holidays, is treated as entertainment.
Christmas parties
A party on your premises on a working day
When a Christmas party is held at your business premises on a working day and only current employees attend, the food and drink is generally exempt from FBT. Taxi travel home for employees is also generally exempt, because it is travel directly from the workplace. Because the party is exempt from FBT, you generally can’t claim a tax deduction or GST credits for the cost.
A party at a restaurant or venue
An off-site party is more likely to be a fringe benefit. It may still be FBT-free under the minor benefits exemption if the cost is less than $300 per person and the benefit is infrequent and irregular. As with an on-site party, a cost that is exempt from FBT is generally not deductible.
If the cost is $300 or more per person, FBT generally applies to the full amount, not just the part over $300. In that case, the cost is generally deductible and GST credits can usually be claimed.
Partners, family and clients
Partners and family members of employees are treated as associates, so the same minor benefits test applies to them. Clients are different, because benefits you provide to clients don’t attract FBT, but the cost of entertaining them is generally not deductible.
Christmas parties at a glance
| Situation | FBT | Tax deduction and GST credits |
|---|---|---|
| Employees, on your premises, on a working day | Generally exempt | Generally no |
| Employees or partners, off-site, under $300 per person | Generally exempt as a minor benefit | Generally no |
| Employees or partners, $300 or more per person | Generally applies | Generally yes |
| Clients | No FBT | Generally no |
Christmas gifts for staff and clients
Gifts are treated differently to parties. A non-entertainment gift, such as a hamper, a bottle of wine, flowers or a gift card, may be FBT-free as a minor benefit when it costs less than $300, and it is generally still deductible with GST credits.
An entertainment gift, such as event tickets, a movie pass or a holiday, follows the entertainment rules. Under $300 it may be FBT-free, but it is generally not deductible.
Each benefit is usually assessed separately against the $300 threshold. That means a Christmas party and a gift for the same employee can each be exempt, provided each one costs less than $300 and meets the other conditions.
Gifts for clients don’t attract FBT. Non-entertainment goodwill gifts, such as a hamper, are generally deductible, while entertainment gifts for clients generally are not.
Christmas bonuses
A cash bonus is treated as salary or wages rather than a fringe benefit. It is generally subject to PAYG withholding and, in most cases, super, and it is deductible for your business. Since 1 July 2026, super on a bonus needs to be paid with the pay run that includes it, under Payday Super.
Are team building activities tax deductible?
It depends on what the activity is. A workshop or training session focused on work skills is generally not entertainment, so the costs are usually deductible and FBT-free.
A social or recreational activity, such as an escape room, a cooking class, go-karting, a sports day or a long lunch, is more likely to be treated as entertainment. The same pattern then applies: if the cost per person is under $300 and the minor benefits exemption applies, there is generally no FBT and no deduction, while if FBT applies, the cost is generally deductible.
Food at a work event follows its own rules. Morning and afternoon tea and light meals at a seminar or training day are not entertainment. A more elaborate meal can also be treated as part of a seminar when the seminar runs for at least 4 hours and the meal is provided immediately before, during or after the working sessions.
The ATO gives the example of a business planning day costing $125 per head, including morning and afternoon tea and a three-course lunch. The morning and afternoon teas are deductible, the lunch is entertainment and not deductible, and because the total is under $300, no FBT applies.
If your team building day mixes training and social activities, it helps to keep a breakdown of each part. That makes it much easier to work out what can be claimed.
Staff retreats, golf days and holidays
Golf days, weekends away and holidays are recreation, so they are entertainment. In the ATO’s example of a golf day costing $320 per person on a non-working day, FBT applies for the employee and their partner. The business can claim a deduction and GST credits for those costs, plus a deduction for the FBT paid, but not for the clients who attended.
If a retreat includes genuine planning or training sessions, keep a record of the business and entertainment parts separately, along with who attended.
Gym memberships and wellness perks
A gym or sporting club membership is recreation. Annual memberships usually cost $300 or more, so the minor benefits exemption generally won’t apply. In the ATO’s example, a $480 membership attracts FBT, and the business can claim a deduction and GST credits for the cost, along with a deduction for the FBT paid.
Morning teas, birthday cakes and refreshments
Tea, coffee, biscuits and simple refreshments provided to staff during the working day are generally not entertainment. A celebration, such as an afternoon tea for a milestone or a birthday, is more social. In the ATO’s example of a celebration afternoon tea on business premises, there is no FBT, but the food and drink is not deductible either.
Keep good records
Clear records make every one of these situations easier to work through at tax time. For each event, it helps to keep the invoices, the cost per person, the date and venue, and who attended, split between employees, partners and clients.
The FBT year runs from 1 April to 31 March, and the FBT rate is 47% for the year ending 31 March 2027. If your business has fringe benefits to report, good records through the year make the FBT return much simpler.
Frequently asked questions
Is a work Christmas party tax deductible?
It depends on whether FBT applies. A party for employees on your premises on a working day, or one costing less than $300 per person, is generally exempt from FBT and generally not deductible. If FBT applies, the cost is generally deductible and GST credits can usually be claimed.
Are team building activities tax deductible?
Training focused on work skills is generally deductible and not entertainment. Social or recreational team building is usually entertainment, so it is generally only deductible when FBT applies.
Can I claim GST credits on a Christmas party?
Generally only when the party is subject to FBT. If the party is exempt from FBT, GST credits generally can’t be claimed.
Are Christmas gifts for staff tax deductible?
Non-entertainment gifts, such as hampers, wine or gift cards, are generally deductible, and may be FBT-free if they cost less than $300. Entertainment gifts, such as event tickets, are generally not deductible unless FBT applies.
What is the $300 minor benefit rule?
A benefit costing less than $300 per person may be exempt from FBT when it is provided infrequently and irregularly. Each benefit is usually assessed separately, and if a benefit costs $300 or more, FBT generally applies to the full amount.
How Schofields Accountants can help
We help small businesses across the Hills District, Greater Sydney and Australia-wide with tax, BAS, bookkeeping and year-round advice, including working out the FBT and tax treatment of staff events and gifts.
If you’re planning a Christmas party, a team day or end-of-year gifts and want to check the tax outcome first, talk to our team. You can also read more about our accounting and tax services and our bookkeeping and payroll services.
This article is general information only and does not take your circumstances into account. FBT and entertainment rules depend on the facts of each event, so check the ATO’s entertainment guidance and seek advice about your own situation.
