A great end-of-year party does wonders for team morale, but the tax rules around it can be a little confusing. The good news? There are a couple of key numbers to keep in mind to stay on the right side of Fringe Benefit Tax (FBT).

Staff gifts: where things can get tricky

This is the area to watch closely, especially if gift-giving is on the agenda. If you give a gift at the Christmas party, the cost of that gift must be added to the cost of the party for the $300 test. This test is for the threshold for employee gifts, prizes or subsidised/discounted goods: $300 per employee, per quarter.

Here’s how it plays out in real life:

• If your party costs $250 per person and you add a $60 gift, the total benefit is $310. That tips you over the limit and triggers FBT on the entire $310 — suddenly, that gift becomes a lot more expensive.
• If the party costs $150 per person and the gift is $100, the total is $250. That’s safely under the limit, as long as there haven’t been any other benefits this quarter that push the total over the $300 limit.

What kind of gift matters too

Once you’re comfortably under the $300 threshold, the type of gift determines how much you can claim back:

• Entertainment gifts (like food, wine, or hampers) are treated the same as the party itself and are only 50% deductible.
• Non-entertainment gifts (such as branded merchandise or books) can generally be 100% deductible.

By keeping an eye on the total cost per person across the quarter, you can treat your team to a great celebration — without an unwelcome surprise from Inland Revenue later on.