A $250 gift card and a $300 gift card look almost the same to your staff. To the ATO they can be very different: one may be an exempt minor benefit, the other a taxable fringe benefit taxed at 47% on a grossed-up value.
This guide covers the Christmas 2026 rules for gift cards, staff and client gifts, and Christmas parties: the minor benefit exemption, when costs are deductible, the FBT rate and the FBT year that ends 31 March 2027. Each rule was checked against the ATO entertainment scenarios and the ATO FBT guide for employers in October 2026.
It is written for small and medium employers planning end-of-year gifts and functions. For the wider picture on what your business can claim, see our small business tax deductions guide.
Key takeaways
- A gift to an employee is generally FBT-free as a minor benefit if it is less than $300 and it would be unreasonable to treat it as a fringe benefit.
- The $300 threshold applies per benefit, but frequency and similar benefits still count.
- A Christmas party is only deductible to the extent it is subject to FBT.
- Benefits to clients are not subject to FBT, and client entertainment is not deductible.
- The FBT rate is 47% for the FBT years ending 31 March 2026 and 2027.
- Self-lodged FBT returns are due 21 May.
Christmas FBT at a glance
| Item | FBT year ending 31 March 2026 | FBT year ending 31 March 2027 |
|---|---|---|
| FBT rate | 47% | 47% |
| Type 1 gross-up (GST credits claimable) | 2.0802 | 2.0802 |
| Type 2 gross-up (no GST credits) | 1.8868 | 1.8868 |
| Minor benefit threshold | Less than $300 per benefit | Less than $300 per benefit |
| FBT year | 1 April 2025 to 31 March 2026 | 1 April 2026 to 31 March 2027 |
| Self-lodged return due | 21 May 2026 | 21 May 2027 |
Source: ATO FBT rates and thresholds, ATO minor benefits exemption, ATO lodging your FBT return, checked 7 October 2026.
When is a staff gift card exempt from FBT?
Under the minor benefits exemption, a benefit is exempt if it has a notional taxable value of less than $300 and it would be unreasonable to treat it as a fringe benefit. The ATO lists factors to weigh up:
- how often and how regularly you provide the benefit
- the total value of the benefit and identical or similar benefits
- the likely total value of other associated benefits
- how hard it is to work out the value
- the circumstances in which it was provided
A single gift card at Christmas, under $300, is the classic case. The ATO’s own example is a single Christmas gift of a bottle of whisky or perfume under $300. Monthly gift cards used as a reward system look more like salary and are less likely to qualify.
Is the $300 limit per gift or per year?
Per gift. The ATO says the threshold applies separately to each benefit, and TR 2007/12 states it is not an upper limit on the total value of minor benefits an employee can receive. A $200 Christmas card and a $200 birthday card are each tested separately, although the total of similar benefits is one of the factors above.
Are Christmas parties deductible?
The ATO FBT guide for employers is direct: the cost of a Christmas party is income tax deductible only to the extent it is subject to FBT. Exempt minor benefits and exempt property benefits cannot be claimed, and client entertainment is neither subject to FBT nor deductible.
| Scenario | FBT | Income tax deduction |
|---|---|---|
| Party on your premises, working day, current employees only | Exempt | No |
| Off-premises party, less than $300 per head, minor benefit | Exempt | No |
| Off-premises party, $300 or more per head | Taxable | Yes, with GST credits |
| Clients attending the party | Not subject to FBT | No |
| Gift to employee, less than $300, infrequent | Exempt minor benefit | Depends on whether it is entertainment |
| Gift to employee, $300 or more | Taxable | Yes, with GST credits |
Gifts handed out at the party, such as wine or hampers, are tested separately from the party itself. The ATO’s FBT and festivities update also confirms the on-premises food and drink exemption for current employees on a working day.
How are gift cards and other gifts treated for tax?
The no-deduction rule above is aimed at entertainment, which the ATO treats as the provision of food, drink and recreation, such as event tickets, golf days or holidays. For a gift card or hamper, the deduction question turns on whether that particular gift is entertainment, not just on its value.
Where FBT applies, the ATO says you can claim an income tax deduction and GST credits for the cost. If you are unsure whether a particular gift is entertainment, check before you claim it, because a wrong call affects both FBT and income tax.
What about gifts to clients?
The ATO confirms that benefits to your business clients are not subject to FBT. Client entertainment, such as tickets to an event or a long lunch, is also not deductible. For client gifts, record who received each one, what it was and why, so the business purpose is clear.
When do you lodge an FBT return?
The FBT year runs from 1 April to 31 March. You lodge a return if you have FBT payable or paid FBT instalments during the year. Self-lodgers are due 21 May and tax agents can generally lodge by 25 June if you are their FBT client by 21 May. Our FBT return service handles the calculations and lodgment.
A gift card should never replace pay that is owed. Wages, bonuses and award entitlements are covered by the Fair Work Ombudsman. If you want to offer benefits year-round in a structured way, salary packaging and salary sacrifice follow different rules.
Worked example: $250 gift cards versus $500 gift cards
An employer gives each of its 10 employees a Christmas gift card. Assume no GST credit can be claimed on the cards, so the Type 2 gross-up rate of 1.8868 applies if FBT is payable.
- $250 each: total cost 10 x $250 = $2,500. Each card is less than $300 and given once a year, so it can be an exempt minor benefit. FBT = $0.
- $500 each: total cost 10 x $500 = $5,000. Not a minor benefit. Grossed-up value = $5,000 x 1.8868 = $9,434. FBT = $9,434 x 47% = $4,433.98.
Doubling the card value adds $2,500 to the gift budget and $4,433.98 of FBT, so the $500 cards cost $9,433.98 before any income tax deduction, against $2,500 for the $250 cards.
Rule of thumb: keep each Christmas gift under $300, give it once, and keep it separate from the party. Then check deductibility separately, because an FBT exemption usually means no deduction for entertainment.
Common mistakes with Christmas gifts and FBT
- Giving exactly $300: the test is less than $300, so a $300 card is not a minor benefit.
- Claiming the party anyway: exempt party costs are not deductible.
- Lumping gifts into the party: wine or hampers given at the function are tested on their own.
- Treating cards as bonuses: regular cards tied to targets look like remuneration, not minor benefits.
- No records: keep a register of recipient, date, value and reason for every gift.
FAQ about Christmas gift cards and FBT
Is a $300 gift card exempt from FBT?
No. The minor benefits exemption only applies to a benefit with a notional taxable value of less than $300, so a $300 card does not qualify. Even under $300, the benefit must also be one that it would be unreasonable to treat as a fringe benefit, which takes into account how often and how regularly you give similar benefits.
Is the $300 limit per year or per gift?
Per benefit. The ATO says the threshold applies separately to each benefit, and TR 2007/12 confirms it is not an upper limit on the total minor benefits an employee can receive. Frequency and the total value of similar benefits still matter when deciding whether a benefit is minor, so regular gift cards throughout the year are a risk.
Can I claim a tax deduction for our staff Christmas party?
Only to the extent the party is subject to FBT. The ATO guide for employers says costs that are exempt from FBT, such as exempt minor benefits and a party on your premises on a working day for current employees, cannot be claimed as an income tax deduction. Client entertainment is not subject to FBT and is not deductible.
What is the FBT rate and FBT year?
The FBT rate is 47% for the FBT years ending 31 March 2026 and 31 March 2027. The FBT year runs from 1 April to 31 March. If you lodge your own FBT return it is due 21 May, and tax agents can generally lodge by 25 June if you are their FBT client by 21 May.
Do gifts to clients attract FBT?
No. FBT applies to benefits provided to employees and their associates, and the ATO confirms benefits to business clients are not subject to FBT. Deductibility is a separate question: client entertainment, such as event tickets or a restaurant meal, is not deductible. Keep a note of what each client gift was and why you gave it.
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Nanak Accountants can review your Christmas gift and party plans, work out any FBT and lodge your FBT return. Call 1300 626 258 or book a free 15-minute discovery call. Our older small business deductions overview has more on general claims.
This article is general information only and is not personal tax or legal advice. Figures and rules were checked against the ATO FBT rates, minor benefits, entertainment scenarios, FBT guide for employers, TR 2007/12 and FBT lodgment pages on 7 October 2026. Rates and thresholds change, so confirm the current position before acting.
