FBT for Entertainment and Gifts

Fringe Benefits Tax (FBT) can be complex at the best of times, and it often catches small and medium‑sized business owners off guard during the festive season.

Whether you’re planning a staff Christmas party, sending hampers to loyal clients or rewarding employees with gift cards, it’s important to understand when FBT applies and how to maximise income tax deductions and GST credits.

This ar ticle breaks down the rules around entertainment‑related fringe benefits and gift giving so your business can celebrate without unexpected tax bills.

What is FBT and How Does It Apply to Entertainment and Gifts

Entertainment covers food, drink and recreation provided to employees and their associates (for example, partners or family members). The Australian Taxation Office (ATO) considers a benefit to be entertainment based on factors such as why it’s provided (to enjoy versus to sustain), what is provided (elaborate meals with alcohol versus light refreshments), when it’s provided (outside or during work hours) and where it’s provided (on‑premises or offsite). Business lunches, staff social functions, sporting events and concert tickets are all examples of entertainment.

FBT applies to entertainment benefits provided to employees and their associates unless an exemption or concession applies. Benefits given solely to clients are never subject to FBT; however, entertainment costs that escape FBT are generally not tax deductible and no GST credit is available. Understanding the difference between deductible and non‑deductible expenses is key to effective tax planning.. Learn more from the ATO’s guide to entertainment fringe benefits.

At Sageon, we work closely with businesses through our SMB services to ensure FBT compliance and support efficient business planning.

Gifts to Clients Vs Gifts to Staff

Gifts to Clients

Gifts given to clients are not subject to FBT. If the gift is non-entertainment in nature and intended to maintain goodwill or generate income, it is usually tax-deductible and you may also be eligible to claim a GST credit. Examples include wine, flowers or promotional items.

However, entertainment gifts such as concert or sports tickets are not deductible and do not attract GST credits.

Gifts to Staff

Gifts to employees are treated differently. If a gift is under $300 including GST and is not entertainment-related, it may be considered a minor benefit and exempt from FBT. Examples include gift cards, food hampers and retail vouchers.

If the value exceeds $300 or the gift is entertainment-related, such as event tickets or meals, it will typically attract FBT. You can claim a deduction and GST credit if FBT is paid.

Entertainment, Staff Events and GST Credits

When is something “entertainment”?

The Australian Taxation Office (ATO) defines entertainment when food, drink or recreation (including travel and accommodation linked to those) is provided to employees or their associates. Key factors: Why you provide it, what you provide, where and when. If the purpose is mainly for enjoyment rather than business, it’s likely entertainment. 

GST credits and deductions

• If the benefit is entertainment and FBT is not paid (for example, it qualifies as a minor benefit), you generally cannot claim a deduction or GST credits. For non‑entertainment gifts to employees under $300 that meet the minor benefits test, no FBT applies and the cost is normally deductible and creditable for GST.

• If you do pay FBT on the benefit, you may be able to claim the GST credit and the deduction.

• Also, entertaining clients: though FBT doesn’t apply, you generally cannot claim GST credits or a deduction if you are entertaining clients (unless somehow the benefit falls out of the entertainment definition). 

Practical Scenarios for SMEs

Scenario: Staff Christmas hamper

You provide a hamper worth $150 (GST inclusive) to each staff member at Christmas. Because it’s under $300, non‑entertainment (if it’s a standard hamper, not event tickets) and irregular, this qualifies as a minor benefit. No FBT (minor benefit). Deduction and GST credits are generally available because it’s a non‑entertainment gift.

Scenario: Staff theatre tickets worth $350 each

This is an entertainment benefit (tickets to show). Value exceeds $300. FBT applies. You can claim tax deduction & GST credits (assuming you pay the FBT).

Scenario: Client gift of branded merchandise worth $250

As long as it’s non‑entertainment and aimed at maintaining business goodwill, it should be deductible, and you can claim GST credit. No FBT applies because it’s to a client. 

Scenario: Client entertainment – golf day, cost $320 per guest

Because its entertainment, deduction and GST credit are not available for the cost incurred on the clients. No FBT applies for the client side. For the staff side (if employees attend) FBT may apply. 

How Sageon supports SMEs with FBT

Sageon offers practical tax and compliance support designed for growing businesses. We help you:

• Determine if a gift or benefit is subject to FBT

• Structure your staff and client gifting to minimise tax exposure

• Understand when GST credits and deductions apply

• Stay compliant with ATO reporting requirements

Through our small business services, we provide proactive advice that helps you get ahead of the rules and avoid surprises.

Practical tips for end‑of‑year giving

Choose non‑entertainment gifts when possible to maximise deductions and GST credits. Hampers, gourmet products and gift cards are popular options that are FBT‑exempt when under $300.

1. Plan events around the $300 threshold. If you want to avoid FBT, keep per‑person costs (including food, drink, entertainment and transport) under $300. If you decide to exceed the threshold, remember you can claim tax deductions and GST credits.

2. Separate staff and client expenses. Allocate costs to employees, associates and clients individually. This determines whether FBT applies and which expenses are deductible.

3. Keep detailed invoices and records. To claim GST credits, ensure you obtain valid tax invoices for gifts and entertainment. Document the business purpose and attendee list for events.

4. Seek professional advice. The rules around FBT and entertainment are complex, particularly when applying the 50/50 split method or meal entertainment method. Sageon’s taxation specialists can help you structure celebrations and rewards to minimise tax while supporting employee engagement.

Get FBT for Entertainment and Gifts Right

With the new financial year ahead, now is the time to review how you treat client and staff gifts, hampers, gift cards, entertainment and events. Use the minor benefit threshold (< $300) for staff gifts wisely. Be clear on what counts as “entertainment” – because if it is, your deduction and GST credit opportunities change dramatically. And remember, client benefits don’t attract FBT, but they still require careful structuring.

If you’re an SME owner, start‑up or growing a business and you’d like specialist support to make sense of FBT, GST credits and gift/entertainment planning, reach out to our experts at Sageon today via our SMB page. We’re committed to helping you navigate the rules confidently and maximise your business outcomes.