Employer Guide: Navigating FBT for End-of-Year Celebrations & Gifts
As the end of the calendar (and financial) year approaches, many employers begin planning staff parties, celebrations, and gifts to show appreciation for their teams. However — as noted by the Australian Taxation Office (ATO) — it’s important to understand how fringe benefits tax (FBT) may apply. Under certain circumstances, these festive benefits can be exempt from FBT (saving your business both time and money).
This article for your information only and outlines when your end-of-year celebrations and gifts are likely to be FBT-exempt, and what you should watch out for.
When End-of-Year Celebrations & Gifts Are Exempt from FBT
Food and drink on business premises, on a working day:
If you host a staff lunch, morning tea, or celebration at your workplace during a working day, and supply food and drink for current employees, those benefits are exempt from FBT.
This exemption applies regardless of the cost; the fact the food and drink are provided on-site and consumed during work time is what matters.
Minor-benefit exemption — for off-site events, gifts, recreational activities or parties including associates
If you hold a function off the business premises — for example, at a restaurant or a venue — or give gifts or recreational benefits (e.g., a golf day) to staff (or their associates such as partners), the FBT might still be avoided if the benefit qualifies as a “minor benefit.”
To qualify under the minor-benefit exemption, the benefit must:
Have a notional taxable value less than $300 (GST-inclusive) per person.
Be provided on an infrequent or irregular basis — that is, not as part of a frequent or regular pattern (e.g., weekly lunches).
It must be “unreasonable to treat it as a fringe benefit” — in other words, the benefit must be modest and occasional.
Examples:
A Christmas lunch at a restaurant off-site, costing $250 per head.
A staff gift (non-entertainment) such as a hamper or small gift under $300.
A recreational activity (e.g., a team golf day) under $300 per person.
If these conditions are satisfied, the benefit may be exempt from FBT.
What Employers Need to Watch Out For — When FBT May Apply
While the exemptions are generous, there are some common pitfalls:
If you choose to use a valuation method for meal entertainment such as the “50:50 split method” (or the “12-week register method”), the minor-benefit exemption and the on-site food/drink exemption no longer apply — and the entertainment may become subject to FBT.
Even if gifts or meals fall under the $300 threshold, the frequency matters: regularly supplying small “perks” like weekly lunches or monthly gift vouchers may disqualify you from the minor benefit exemption because such benefits would then be considered part of an ongoing remuneration package.
Food or drink for associates (e.g., spouses or partners) only qualifies under the minor-benefit exemption — not the on-site exemption that applies for employees.
Even when a benefit is exempt from FBT, you generally cannot claim an income tax deduction or GST input tax credits for that benefit.
Practical Tips for Employers for Year-End Planning
Host your event on-site during a working day if possible — this is the cleanest way to ensure meals are FBT-exempt.
If holding off-site, carefully budget per person to stay under the $300 threshold for everyone attending (employees and associates).
Provide gifts only occasionally, not as a regular benefit — ideally at special times (e.g., Christmas, end-of-year) to qualify as “infrequent/irregular.”
Track each benefit separately (meal, gift, recreation) when evaluating the minor benefit exemption — the per-person $300 limit applies to each benefit individually.
Keep good records — dates, attendees, costs per person — so you can justify the classification and exemptions, if needed.
For more details and to find out if benefits provided to employees and/or associates are subject to FBT, tax deductible or not, and more, visit the tax ruling TR 97/17, link provided below:
https://www.ato.gov.au/law/view/document?docid=TXR/TR9717/NAT/ATO/00001
The Bottom Line
While the festive season offers a great opportunity to reward and thank staff, it doesn’t have to come with a heavy FBT burden. As long as your workplace celebrations, gifts or recreational outings meet the criteria set by the ATO — most commonly by being modest (under $300 per person) and infrequent — you may avoid FBT altogether.
Employers who plan carefully and keep good records can enjoy the goodwill and morale boost of a year-end celebration without the tax complications.