The festive season is fast approaching, and workplaces across Australia are gearing up for end-of-year lunches, parties, and well-earned rewards. It’s a time to recognise your team’s hard work and wrap up the year on a positive note, but before the celebrations begin, it’s worth taking a moment to consider how those generous gestures might look through the tax lens. Whether it’s a gift under the tree, a staff dinner, or a weekend getaway, certain benefits provided to employees can attract Fringe Benefits Tax (FBT). Our 2025 Holiday FBT Guide walks you through the latest rules for the 2025–26 FBT year, highlighting what’s exempt, what’s not, and how to enjoy the season without facing an unexpected tax bill in March.

A Quick FBT Refresher

Fringe Benefits Tax (FBT) is a tax employers pay on certain benefits they provide to their employees or their employees’ family members in place of, or in addition to, their salary or wages. The FBT year runs from 1 April 2025 to 31 March 2026, and the tax rate remains at 47 percent. FBT is separate from income tax, and it’s the employer who is responsible for paying it.

During the festive season, FBT can apply to gifts, parties, and other perks provided to staff. Knowing which benefits are exempt and which aren’t helps you celebrate confidently without unexpected costs later. For a full overview of how FBT works, see our earlier post on  A Quick Guide to Fringe Benefits Tax.

FBT and Festive Gifts for Employees

• Non-Entertainment Gifts

These are the safest option for employers. Examples include hampers, gift vouchers, wine, flowers, or tech gadgets. If the value is under $300 (inclusive of GST) and the gift is provided infrequently, it can be exempt from FBT under the minor benefits rule. Such gifts are generally tax-deductible and allow GST input tax credits, making them both practical and tax-efficient.

• Entertainment Gifts

Tickets to concerts, sporting events, or experience vouchers fall under entertainment and are treated differently.
Even if they cost less than $300, they usually don’t qualify for deductions or GST credits. Keep this distinction in mind when budgeting your staff gifts.

For further guidance on distinguishing entertainment from non-entertainment gifts, visit the ATO’s guide.

Planning the Office Holiday Party

• On-site Parties

If you host a party on business premises during work hours, it’s generally FBT-exempt for employees. However, if you invite family members or other associates, FBT may apply to their portion of the cost.

• Off-Site Parties

For parties held off-site (such as at a restaurant or venue), if the cost per head is under $300, the minor benefits exemption may apply. If the cost exceeds $300 per person or includes non-employees, FBT is likely to apply.

• Tax Deductibility and GST

If your event is FBT-exempt, you generally can’t claim a tax deduction or GST credits. However, where FBT is payable, the expense is usually deductible, and GST credits can be claimed. This can be an important budgeting consideration.

Accommodation and Travel: FBT Considerations

• Event-Related Travel

If you pay for staff travel or accommodation to attend a party or end-of-year event, FBT may apply unless it qualifies for the minor benefits exemption (under $300 and infrequent). The exemption for work-related travel doesn’t extend to purely social or recreational trips.

• Holiday Bonuses and Travel Vouchers

Holiday travel incentives or flight vouchers provided for personal use are generally subject to FBT. To avoid surprises, check the FBT impact before including them in your staff rewards.

Key FBT Updates for 2025–26

• FBT rate: 47 percent (unchanged)

• Gross-up rates: Type 1 = 2.0802 | Type 2 = 1.8868

• Minor benefits exemption threshold: still $300 (inclusive of GST)

• Plug-in hybrid vehicles (PHEVs): from 1 April 2025, no longer eligible for the electric-vehicle FBT exemption unless covered by a pre-existing commitment before 1 April 2025

• Record-keeping flexibility: employers can rely on existing business records (like expense reports or rosters) rather than employee declarations for certain FBT exemptions

• ATO focus areas: employee entertainment, travel benefits, and accurate FBT reporting remain compliance priorities for the 2025–26 year

Practical Tips for a Compliant Festive Season

• Plan Thoughtfully

Maximise FBT exemptions with non-entertainment gifts under $300, and if you’re organising a party, aim for a setup that minimises tax implications, like hosting it on-site.

• Document Everything

Keep detailed records of expenses, beneficiaries, dates, and event types. These details will make FBT filing much easier and ensure you have everything on hand for claims or exemptions.

The end of the year is a time to celebrate achievements and show appreciation for your team, but it also pays to stay mindful of your tax obligations. Understanding how FBT applies to gifts, parties, and staff perks helps you celebrate confidently and avoid unexpected costs when the FBT year closes on 31 March 2026. At MKG Partners, we manage FBT compliance for our clients each year, ensuring all benefits are reviewed and reported accurately. If you’d like assistance with your FBT obligations this festive season, contact your MKG accountant for guidance.

For more details information on Fringe Benefits Tax (FBT), you may be interested in our previous blogs: A Quick Guide to Fringe Benefits Tax and Logbook Requirements for Fringe Benefits Tax. These articles provide further insights into FBT and the importance of maintaining a logbook for compliance. Feel free to explore them for a comprehensive understanding of FBT obligations.