Firstly, an entertainment expense is business-related if you spend the money to help your business earn income otherwise it’s private and you cannot claim it as a tax deduction.

For example, both entertaining an existing or potential business contact or holding an event for employees are business-related activities.

Here are the key Christmas related rules:

Staff Christmas Parties

Staff Christmas parties on or off the premises are 50% deductible as entertainment. GST can be claimed on this 50%. The other 50% is treated as non-deductible entertainment and no GST claim can be made. The same rules apply if it is a party for clients.

Christmas Gifts to Staff

Gifts to staff are 100% deductible, however depending on the value of these, FBT may be payable. There is an annual exemption of the lower of $1,200 per employee ($300 per quarter, if FBT is paid quarterly) or $22,500 per employer.

Transport to Christmas Parties Costs

Transport costs provided to employees to attend Christmas parties is 100% claimable, however FBT may be payable as mentioned above.

Christmas Gifts to Clients

Christmas gifts to clients are 50% deductible.

Charitable Christmas Entertainment to the Public

Entertainment provided to the public for charitable purposes, e.g. donating food to a children’s hospital Christmas party, is fully deductible.

Christmas Morning/Afternoon Teas

Light refreshments, like morning and afternoon teas, are 100% deductible.