What Christmas expenses are actually tax deductible

Christmas can get expensive for small businesses. Between staff parties, client gifts, and end-of-year catch-ups, it’s easy to assume these costs are deductible.

The reality? Some Christmas expenses are claimable, many aren’t. Here’s a simple breakdown.

Staff Christmas parties

Staff Christmas parties can be deductible, depending on how they’re held.

Generally deductible when the event is:

• For employees only

• Held on a workday

• On business premises

In these cases:

✔ Deductible

✔ No Fringe Benefits Tax (FBT)

✔ GST credits may apply

Off-site events, large costs, or including partners and family may trigger FBT.

Client Christmas gifts

Most client gifts are not deductible.

This includes:

• Alcohol

• Hampers

• Flowers or chocolates

These are usually classed as entertainment, meaning:

✖ Not deductible

✖ No GST credits

Exception: Low-value promotional items (under $300) used for advertising, such as branded merchandise, may be deductible.

Staff gifts & bonuses

Gifts:

Non-cash gifts may be deductible, but FBT can apply depending on value and type.

Bonuses:

Cash bonuses are:

✔ Deductible to the business

✔ Taxable to the employee

✔ Subject to PAYG and super

Christmas lunches & client entertainment

Meals and events involving clients are generally not deductible, even if business is discussed.

The ATO classifies these costs as entertainment, which means:

✖ No deduction

✖ No GST credits

Decorations & office expenses

Christmas decorations used in your business premises are usually:

✔ Deductible

✔ GST claimable (if registered)

Examples include trees, lights, and office décor.

Final tip

Before spending, ask:

• Is this for staff or clients?

• Is it entertainment?

• Will FBT apply?

• Can I claim GST?

A quick check now can prevent surprises later.

Need clarity before you spend?

Christmas tax rules are easy to get wrong.

If you want to know what’s deductible before you swipe the card, Accounting Navigator can help you plan ahead, not fix mistakes later.

Join our Bookkeeping Series, where we break down the essentials step-by-step so you stay cash-flow strong, compliant, and in control all year round.