Short answer: usually yes, if you choose the right kind of gift. In Australia, a “non-entertainment” gift such as a hamper, gift voucher or a physical gift box is generally tax-deductible and you can claim the GST credit. “Entertainment” gifts such as concert tickets, movie passes or a day at the races generally are not deductible. For staff, keeping each gift under $300 usually keeps it free of fringe benefits tax (FBT).
December is when small business owners spend the most on thank-you gifts, and it’s also when the tax treatment trips people up. Here’s how it works, in plain English.
1. Gifts for employees
Two questions decide how a staff gift is treated: is it entertainment, and is it under $300?
Non-entertainment gifts:
These are physical gifts or vouchers the person enjoys on their own time, for example a hamper, a bottle of wine, a gift card, skincare, or a wellbeing gift box. They are:
- Tax-deductible for the business
- Eligible for GST credits
- FBT-free if each gift is under $300 per employee and given occasionally (the “minor benefits” exemption)
Entertainment gifts:
Tickets to a show, a sporting event, a holiday or a restaurant voucher are treated as entertainment. Even when they fall under $300 and are FBT-exempt, they are generally not deductible and you can’t claim the GST.
Watch the $300 line:
The minor benefits test applies to each benefit on its own. A 320giftisn’t”20 over”. The whole $320 becomes subject to FBT. Keep each gift comfortably under the threshold, and remember that the Christmas party and the gift are assessed as separate benefits.
2. Gifts for clients and suppliers
FBT doesn’t apply to clients, because they aren’t your employees. The question is simply whether the gift has a business purpose, such as building goodwill or future business.
- Generally deductible: hampers, wine, branded merchandise and other non-entertainment gifts given to maintain the business relationship.
- Generally not deductible: entertainment (taking a client to a show or a long lunch), and capital items such as a tablet or other high-value tech.
- GST: you can only claim the GST credit on gifts that are deductible.
3. A quick comparison
| Gift | Staff: FBT (under $300) | Deductible? | GST credit? |
|---|---|---|---|
| Hamper, wine, gift box | Usually exempt | Yes | Yes |
| Gift card / voucher | Usually exempt | Yes | Yes |
| Concert or movie tickets | Usually exempt | No | No |
| Gift over $300 to staff | FBT applies | Yes (non-entertainment) | Yes (non-entertainment) |
4. Choosing a gift that ticks the tax boxes
The easiest gifts to get right are physical, non-entertainment gifts with a clear per-person price under $300 and a proper tax invoice showing GST. More Australian businesses are moving away from another bottle of wine towards wellbeing gifts. They suit every team member, nobody has to drink, and they’re easy to post to remote staff.
One example is a self-warming eye mask gift set from Melbourne brand Third Hour. It’s a small, light gift box designed for winding down at bedtime, and it suits staff who travel or work long days. Their corporate Christmas gifts come in fixed per-gift prices well under the $300 threshold, with a gift note and wrapping included and one tax invoice for the whole order, which keeps the bookkeeping simple.
Whatever you choose, ask the supplier for a single tax invoice that itemises the number of gifts and the GST. It makes the deduction and the GST credit straightforward at BAS time.
5. Record-keeping checklist
- Keep the tax invoice showing GST.
- Note who received each gift (staff or client) and the per-person cost.
- For staff, check each gift is under $300 and given on an occasional basis.
- Record the business purpose for client gifts (for example, “end-of-year thank-you to key clients”).
- Keep the Christmas party and gifts as separate line items.
The bottom line
For most small businesses, a thoughtful non-entertainment gift under $300 per person is the sweet spot: deductible, GST-claimable and FBT-free for staff. Entertainment-style gifts may feel generous, but they usually cost the business more after tax.
This article is general information only and doesn’t take your circumstances into account. FBT and deductibility rules can change; check the ATO’s current guidance or speak with your accountant before making decisions.