Christmas and Tax
Brad Dickfos • November 18, 2025
(<With the festive season fast approaching, business owners will be turning their mind to year-end celebrations with both employees and clients.>)
Knowing the rules around Fringe Benefits Tax (FBT), GST credits and what is or isn’t tax deductible can help keep tax costs to a minimum. Holiday celebrations generally take the form of Christmas parties and/or gift giving.
(<->)
<Parties)
Where a party is held during a working day, on business premises, attended by current employees only and costs less than $300 a head (GST inclusive), FBT does not apply. However, the cost of the function will not be tax deductible and GST credits cannot be claimed.
Where the function is held off business premises, say at a restaurant, or is also attended by employees’ partners, FBT applies where the GST-inclusive cost per head comes to $300 or more, the costs are tax deductible and GST credits are available.
However, FBT will not apply where the per person cost is below the $300 threshold if it can reasonably be regarded as an exempt minor benefit – i.e., one that is only provided irregularly and infrequently. Where FBT does not apply because of the minor benefit rule, the cost will not be deductible and GST credits will not be available.
Where clients also attend, FBT will not apply to the cost applicable to them, but those costs will not be tax deductible and GST credits will not be available. Where there is a mix of attendees, you may need to keep track of who participated in the function.
<Gifts)
First, you need to work out whether the gift itself is in the nature of entertainment – for example, movie or theatre tickets, admission to sporting events, holiday travel or accommodation vouchers.
Where the recipient of an entertainment gift is an employee (or an associate of an employee) and the GST-inclusive cost is below $300, the minor benefit exemption should apply so that FBT is not payable, in which case the cost will not be tax deductible and GST credits are not claimable. For larger entertainment gifts to employees, however, FBT applies, the cost is deductible, and GST credits can be claimed.
Where the gift is not in the nature of entertainment and it falls below $300, the FBT minor benefit exemption should apply – for example, Christmas hampers, bottles of alcohol, pen sets, gift vouchers. But because the entertainment rules don’t apply, the cost of the gift is tax deductible and GST credits are claimable.
Where a gift is made to a client, the $300 FBT minor benefit exemption falls by the wayside, but as long as it is not an entertainment gift and it was made in the reasonable expectation of creating goodwill and boosting future business it should be deductible to the business. GST credits are also claimable, while the amount is uncapped (within reason).
<Best approach for employees)
Provided partying is not a regular thing in your business, taking employees out for Christmas lunch escapes the FBT net, as long as the cost per head stays below the $300 threshold. While the cost of the function will be non-deductible, and no GST credits are available, that generally has less of a cash-flow impact on the business than the grossed-up FBT amounts.
For employees and their associates, non-entertainment gifts under $300 are a good way to go. Making a non-entertainment gift costing up to $299 is a very tax effective way of showing your appreciation. And because the $300 cap applies separately to each benefit, depending on how generous you feel, you could also make a gift costing up to $299 to the partner or spouse of an employee, which effectively doubles the $300 minor benefits cap.
Where the cost of a non-entertainment gift costing up to $299 is not subject to FBT, it will be tax deductible, with an entitlement to GST credits, giving you the best of both worlds.
<Best approach for clients)
While FBT is off the table for business clients, making a non-entertainment gift (tax deductible; no dollar limit within reason) is actually much more tax effective than wining and dining a key client (non-deductible entertainment). If you put some thought into what gift to buy a client and perhaps deliver it yourself, you might make much more of an impact than inviting them to share a restaurant meal in their already crowded Christmas calendar.
If you’re not sure and you need help in sorting out the tax treatment of your upcoming holiday celebrations and gifting, don’t hesitate to give us a call.
Let’s say you’ve just sold the house you inherited from your parents 12 years ago for $1.3 million. You’ve been renting it out for most of that time, but the property market has been hotting up, and you were told by several real estate agents that they could get you a good price. But what about the tax consequences? At age 50, you’re still working (salary of $120,000 per annum), having returned to the workforce in July 2023 following a five-year absence for personal reasons. You don’t expect to retire from paid employment until age 65 at the earliest. Your total super balance on 30 June 2025 was $300,000, sitting in a retail fund. Your accountant has calculated the net capital gain on selling Mum’s house as $600,000. After applying the 50% CGT discount, this results in a taxable income of $420,000, and a whopping tax bill of $163,538 to go with it. Can anything be done? Depending on your superannuation history, there may be a legitimate way of taking a big chunk out of that tax bill while topping up your super at the same time. Concessional super contributions are subject to an annual cap, which is set at $30,000 for the 2025-26 income year. That figure is well above the mandatory employer super guarantee amount for most income levels. Many people don’t go close to using up their concessional contribution caps, which can leave them with carry-forward concessional contributions. To help people with modest total super balances (below $500,000 on the previous 30 June), the government gives them the option of using some or all of their previously unused concessional contributions cap on a rolling basis for five years – ie, the five previous income years from 2020-21 to 2024-25, plus the current year (2025-26). Conveniently, the ATO keeps track of your carry-forward concessional contributions balance, which you can look up on myGov. The beauty of this arrangement is that you can use your catch-up concessional contributions to make personal deductible contributions, which can offset part of the CGT gain from the sale of the inherited property. Instead of being taxed at the top marginal rate of 47%, the amount of the catch-up contribution is taxed at the normal rate of 15% in your super fund, which creates a net saving of 32% on the contributed amount. It is not unusual for someone to have carry-forward concessional contributions in excess of $100,000, which would take your taxable income down to $320,000, with tax payable of $116,538, or $47,000 less than what your tax bill would be without making the tax-deductible catch-up contribution. That tax saving has to be reduced by $15,000 in contributions tax payable by your super fund, for a net saving of $32,000. Remember, however, that any super contributions you make at age 50 will not be accessible until you reach preservation age (60 if retired or 65 if you’re still working). If you have other plans for that $100,000 (and you did pocket $1.3 million on the house sale) you will need to weigh up your options. But locking up a small part of the house proceeds seems like a small price to pay for a $32,000 tax saving. On the other hand, if you have an appetite for putting even more money into your super, you might want to consider also making a non-concessional contribution of up to $360,000. This is not tax deductible and there is no 15% contributions tax when paid into your fund. That covers the tax side of things but since you have received a life-changing windfall, you should consider getting advice from a licensed financial adviser. If you find yourself in this situation, come in and see us well before 30 June 2026. If you decide to go ahead with making a catch-up contribution the super fund has to be notified, which we can help you with.
With the end of the financial year coming up, now’s a great time to get on top of your tax and super. A little planning before 30 June can help you make the most of any opportunities to reduce tax, boost your super, and avoid last-minute surprises. This checklist outlines key things to consider and action before the financial year wraps up. It’s a simple way to stay on track and finish the year with confidence. TAX CHECKLIST Here are some practical things to consider before 30 June to help you tidy up your tax position and potentially reduce your bill. Bad Debts If you're running a business, write off any bad debts that won’t be recovered before 30 June so they can be claimed. Employee Bonuses and Director Fees Planning to pay employee bonuses or director fees? Make sure they're confirmed in writing and communicated to recipients by 30 June, even if payment happens later. Charitable Donations Bring forward any planned donations and have the highest-earning family member make the gift. Remember: Donations must be to registered charities. They can’t create a tax loss. Keep receipts. Prepay Interest on Loans If you have a loan for an income-generating asset (like an investment property), consider prepaying interest before 30 June to bring forward the deduction. Claim Work-Related or Business Costs Bring forward costs such as repairs, stationery, or supplies by 30 June 2025. These small deductions can add up. This applies to all taxpayers, not just businesses. Prepay Expenses You can claim prepaid expenses, such as insurance or subscriptions. Where the expense is: Under $1,000 – all taxpayers can claim the expense Over $1,000 – fully deductible if you're a small business if the expense relates to a period of 12 months or less. Note that this is also available if it's a non-business expense of individuals, such as work related expenses or rental property costs. Write Off Old Stock If you hold stock, write off any damaged, outdated or unsellable items before 30 June 2025. Review Assets & Depreciation Small businesses (turnover under $10m) can immediately deduct assets under $20,000 that were acquired from 1 July 2024 and ready to use by 30 June 2025. Also, remove any old equipment from your depreciation schedule if it’s been sold, thrown out, or is no longer usable. Electric Vehicles If your business provides an electric vehicle to an employee, you may be eligible for depreciation deductions and Fringe Benefits Tax (FBT) concessions. Defer Income If possible, delay receiving income (like issuing invoices) until after 30 June to push tax into next year. Offset Capital Gains Selling an asset this year with a profit? You could crystallise capital losses before 30 June to offset that gain. Watch out: 'Wash sales' (selling and rebuying the same asset just to get a loss) are not allowed. Defer Capital Gains If you're planning to sell an asset for a gain, consider delaying until after 30 June if it makes sense for your broader financial situation. Personal Services Income (PSI) If you’re working in your own name (like a contractor or freelancer), check that your income qualifies as a business under PSI rules. Business Losses If your business runs at a loss, you may not be able to claim that loss if you carry on a “non-commercial business” - unless you pass one of the ATO’s tests (eg, income, asset, or profit test). Company Loans to Shareholders (Division 7A) If you’ve borrowed from your company, the loan needs to be properly documented, put on commercial terms and repaid. If repaying through dividends, make sure the dividends are legally declared and paid prior to 1 July (with appropriate documentation in place). Trust Distributions If you're a trustee, resolutions must be made before 30 June to properly distribute income to beneficiaries. You also need to let your beneficiaries know what they’re entitled to. Beneficiary TFN Reporting If new beneficiaries gave you their TFN between April–June, you must lodge a TFN report by 31 July 2025. Motor Vehicle Logbook Planning to claim car expenses using the logbook method? Start now and track 12 weeks of usage (can span over two tax years). Also record your odometer readings. Private Health Insurance Make sure you have the right level of cover to avoid the Medicare Levy Surcharge, especially if your family situation has changed (eg. new baby, separation, adult children moving off your policy). Check Your Insurance Cover Review your personal and business insurance needs. Not only does this provide peace of mind, some policies may also be tax deductible, especially if prepaid. Review Your Business Structure Is your current setup still the right one? Changes in income, family, or risk levels may mean a trust, company, or restructure could be more effective. We can help you weigh up your options. SUPER CHECKLIST Make the most of your super before 30 June 2025 with these smart, simple tips. Check Your Contribution Limits Before adding more to super, log in to myGov > ATO > Super > Information to check how much you’ve already contributed. Tip: If you're in an SMSF, your info may not be up to date in myGov, but we can help you work this out. Add to Super and Claim a Tax Deduction You may be able to make a personal deductible contribution and claim it at tax time. To be eligible: You must be over 18 If you're 67–74, you must meet the work test or qualify for a work test exemption If you’re over 75, you must contribute within 28 days of your birthday month Don’t forget: To claim a tax deduction, submit a Notice of Intent to Claim a Deduction to your super fund and get their confirmation before lodging your tax return or making withdrawals, rollovers, or starting a pension. Use Up Unused Contribution Limits Haven’t used your full concessional contribution cap in recent years? You may be able to catch up using the carry-forward rule if your total super balance is under $500,000 on 30 June 2024. Tip – Unused limits from 2019–20 expire after 30 June 2025 so don’t miss out. Split Contributions with Your Spouse You can split up to 85% of your 2023–24 concessional (pre-tax) contributions with your spouse before 1 July 2025. This is a great way to even out your balances and plan ahead for retirement. Note – To use this strategy, your spouse must be under their preservation age or aged 64 or younger and not retired when you make the request to your fund. Get a Tax Offset for Spouse Contributions If your spouse earns less than $40,000, consider making an after-tax contribution to their super. By doing so, you could get up to a $540 tax offset while boosting their retirement savings. Grab a Government Co-Contribution If you earn less than $60,400 and at least 10% comes from work or running a business, you could be eligible for a government co-contribution. All you need to do is add up to $1,000 to your super and the government may add up to $500 extra. Avoid the Division 293 Tax Trap If your income (plus employer contributions) is over $250,000, you may pay an extra 15% tax on some of your super contributions. Strategies like bringing forward expenses or deferring income may help keep you below the threshold. Maximise Non-Concessional (After-Tax) Contributions If you're under 75, you may be able to contribute up to $360,000 in one year using the bring-forward rule. New rules from 1 July 2025 may allow you to contribute even more – speak with us about getting the timing right. Take Your Minimum Pension Payment If you're drawing a pension from your super, make sure you take the minimum amount by 30 June. Missing the minimum may affect your fund’s tax benefits for the whole year. Age: Under 65 Minimum Pension: 4% Age: 65-74 Minimum Pension: 5% Age: 75-79 Minimum Pension: 6% Age: 80-84 Minimum Pension: 7% Age: 85-89 Minimum Pension: 9% Age: 90-94 Minimum Pension: 11% Age: 95 or more Minimum Pension: 14% Need Help? We’re here to help you make the most of EOFY tax and super opportunities. Contact us to discuss what options might work best for your situation.
Here are some more detailed tips relating to a couple of common claims that often attract ATO scrutiny. Working from home A lot of people are still regularly working from home for at least part of the week. If you do, you are entitled to a deduction for the additional costs you incur. To be eligible to make a claim it is not necessary to set aside an area exclusively for business or employment related use. A shared dining table is all you need. Except in very unusual cases, deductions are not available for occupancy costs such as mortgage interest, rent, rates and insurances. Most people make their claim using the fixed rate method, which is 70 cents per hour for 2024-25. The fixed rate method covers home and mobile internet costs, mobile and home phone costs, power and gas charges and stationery and computer consumables. Under the fixed rate method, you can also claim depreciation and repairs for assets used such as desks, office chairs and laptops, where those items cost more than $300. This is on top of the 70 cents per hour. Alternatively, you could use the actual cost method, but that requires more detailed records and receipts. We can help you to legitimately maximise your claim, but before you can claim anything, you need to have: A record of the hours worked from home. This has to be maintained for the entire 2024-25 financial year – you can’t just keep a detailed record for a representative period and apply it for the full year. One current sample invoice for each of the costs the fixed rate method is intended to cover – internet costs, phone costs, energy bills. It’s important to take copies of those invoices now and file them with your tax records rather than scramble around looking for them when the ATO comes asking for them in a few years’ time. Use of your own vehicle for business or employment related purposes For starters, any reimbursement you receive from your employer, either on a cents per kilometre basis or a flat amount, is assessable in your hands and will be shown on your payment summary. Not everyone who uses their own car for work is reimbursed in this way, however, and you are still entitled to make a claim, in spite of not receiving any reimbursement. There are two alternative ways of claiming a deduction for business or employment related car use – the cents per kilometre method or the logbook method. For those who use the cents per kilometre method (which only applies to claims of up to 5,000 kms) the process is pretty simple – just multiply the kilometre figure by 88 cents. So if your business or employment related use was 4,000 kms, your 2024-25 claim would be $3,520. Under the cents per kilometre method, you don’t need to keep a full-blown logbook that tracks every journey. However, the ATO may ask you how you came up with the claimed distance, especially where you’re pushing up against the 5,000 km threshold. So you will need to have a diary of some sort that shows how you have estimated the kilometres being claimed – anything to prove you haven’t just plucked the figures out of thin air. People sometimes get confused about what qualifies as business or employment related car use. You can make a claim where: you travel to locations that are not your usual workplace; you have no fixed workplace and travel from site to site; you carry tools or equipment which are bulky and cannot be securely stored at your workplace; you drive to see customers or suppliers; you drive to seminars or to a second job. Non-deductible travel includes situations where: you drive to and from your regular workplace; your employer pays your car expenses directly. The logbook method is the alternative to the cents per km method. As the name implies, you need to keep a detailed logbook, but only for a representative period of twelve weeks to work out your business related use. Provided your pattern of car usage remains broadly the same, the resulting business use percentage is good for five years, after which you have to repeat the process. The logbook method might be more appropriate where your business or employment related car use is well over 5,000 kms. For each journey, the logbook needs to show the date of the trip, the starting and finishing odometer reading, the distance travelled and the reasons for the journey. Where you are completing your logbook for the 2024-25 financial year, you need to complete the logbook entries during that year, after each trip. The logbook should come up with a business percentage, which can then be applied to all the costs associated with running the car, including depreciation. Receipts, invoices or other documentary evidence has to be maintained to verify the actual expenditure being claimed. Car logbooks are available from Officeworks and most stationers, and can also be ordered online. We can help you with the record keeping and logbook requirements.
