Celebrate Without the Surprise Tax Bill: What You Need to Know Before the Festivities

The end of the year is a fantastic time to recognise your team’s hard work – whether it’s with a staff party, a small gift or a fun outing. But for employers, it’s also a time to pause and ask: “Will our celebration trigger an unexpected tax liability?” With the right planning, you can keep your team smiling and manage the tax implications comfortably.

Here’s a guide for businesses on how to provide employee celebrations and gifts that feel great – while staying on the right side of FBT.

What is FBT and why does it matter?

FBT is a tax on certain non-cash benefits an employer provides to employees (or their associates) in respect of their employment. These can range from staff parties and recreational events, to gifts, tickets or non-cash perks. Although the employee isn’t the one paying the FBT, the employer is responsible – so mis-planning can mean an unwelcome tax bill.

Because many end-of-year benefits are non-cash (think: staff lunches, outings, hampers, vouchers), it’s smart to understand how the FBT rules apply in this festive period.

When the benefits are broadly exempt (that’s the good news)

Thanks to exemptions and concessions, not everything employers provide to staff at year-end will trigger FBT. Here are some common scenarios that generally avoid FBT liability:

• If you host a celebration on your business premises, during working hours, and only for current employees: the provision of food and drink on-site may qualify as an exempt property benefit. That means no FBT on that benefit.
• If you provide a benefit that is infrequent, minor and low-cost (commonly under $300 per employee), it may fall under the “minor benefits exemption”. That means FBT won’t apply if it’s given infrequently and is not dependent on performance.
• Gifts to clients or customers (rather than employees) are not subject to FBT (though other tax and GST considerations apply).

So yes – you can host a great end-of-year event or give thoughtful gifts and avoid a surprise tax hit – but you’ll want to keep an eye on how, when, where and for whom the benefit is provided.

Where things often go wrong (and how to avoid it)

Because the exemptions come with conditions, it’s in the “how” that many businesses stumble. Here are the key risk areas and tips to manage them:

1. Location & timing matter

• Off-site events (e.g., at a restaurant or function venue) mean the “on-premises” exemption won’t apply, so FBT may be triggered unless other exemptions (such as the minor benefits exemption) are available.
• If associates of employees (spouses, partners) attend, the benefit to the associate often doesn’t qualify for the on-site exemption – meaning FBT may apply unless tightly managed.

2. Cost per person

• While there is no “safe amount” blanket rule, costs going above the $300 threshold per benefit (in relevant cases) can mean it’s no longer a minor benefit. Keeping per-head expenditure sensible helps maintain the minor benefit exemption. 
• Don’t treat gifts and event costs entirely separately – combined, they may exceed what the exemption lets you do.

3. Gifts vs entertainment

• If you’re giving a tangible gift (e.g., hamper, voucher), it may be assessed differently to an event. If it’s provided in connection with an employee’s employment, FBT may apply unless the exemption criteria are met. 
• Entertainment benefits (food, drink, recreation) have their own specific valuation methods and rules (e.g., under Division 9A). Once you elect one of these methods, you may lose some of the more generous minor benefits or on-site exemptions. 

4. Good record keeping

• If the tax office ever asks, you’ll want accurate records of who attended, what benefit was provided, cost per attendee, whether it was off-site/on-site, whether associates attended, and so on. Lack of information makes dealing with the tax office much harder.

Practical planning checklist for employers

To make sure your year-end benefits hit the right tone and stay compliant, here’s a practical checklist for you:

• Decide whether to run the event on-site during normal working hours (stronger case for exemption) or off-site (more care needed).
• If inviting partners/associates of employees, consider separate costings or eligibility or keep their benefit cost under the minor benefit threshold.
• Work out the cost per person (including food, drink, travel, venue hire, etc.) and check whether that cost means you’re outside an exemption.
• If giving gifts/treats, check their value per employee and whether they’re “regular” or “infrequent” — because the minor benefit exemption demands the benefit be occasional and non-routine.
• Decide the valuation method for any entertainment benefits. If you elect one of the more complex methods (eg. 50/50 split under Division 9A), you may lose simpler exemptions.
• Keep clear records: who, when, where, what, cost. Keep them for at least five years (as per general obligations).
• If in doubt, run a “worst-case” cost per person scenario and see what the tax exposure might be — then adjust the scope accordingly.
• Communicate clearly with your employees: letting them know the event’s on-site, for staff only, during working hours etc reduces the risk of hidden costs.

Why this matters for Simmons Livingstone clients

At Simmons Livingstone, our clients often work hard through the year, and year-end events or staff gifts are a well-earned reward. Making sure you structure those celebrations thoughtfully means you can deliver that reward without the tax surprise. By planning ahead, you strengthen your employer brand (your people feel supported and appreciated) and you avoid slipping into a situation where extra tax or penalties erode the goodwill.

The key is structuring those celebrations and gifts in a way that keeps them tax-efficient. With sensible choices on timing, cost, attendees and documentation, you can host a memorable end-of-year event that remains compliant.

If you’d like help modelling your year-end benefits, checking potential FBT exposure or ensuring your documentation is all in place, we’re here to help at Simmons Livingstone. Call 1800 618 800 or email admin@simmonslivingstone.com.au.