The holiday season is here—cue the festive chaos, last-minute shopping, and maybe a cheeky cocktail or two. For small business owners, it’s also a time to think smart about your finances. From client gifts to employee bonuses and even work trips, there are ways to make the most of your deductions without stepping into a tax minefield.
We’ve broken it all down so you can enjoy the silly season, keep your tax planning on track, and avoid any costly surprises come tax time.
1. Client Gifts
- Gifting clients during the holiday season can be a great way to strengthen business relationships, and it might even save you money on taxes! According to ATO guidelines (TD 2016/14, to be exact), gifts are tax-deductible if they’re connected to your business and aim to generate future income, like encouraging repeat business or new contracts.
- However, gifts that are personal, extravagant, or not linked to business goals won’t qualify for deductions. Make sure to keep records, including the recipient’s details and the gift’s business purpose to support your deduction claim. Keep it simple, business-related, and strategic!
2. Christmas Parties
- Planning a Christmas party for your team? Under Income Tax Assessment Act 1997, the costs of staff Christmas parties are usually considered entertainment expenses and therefore not deductible.
Extravagant Christmas parties can lead to extravagant taxes, if you don’t want Santa delivering you some Fringe Benefit Tax (FBT) issues this Christmas here’s some tips to avoid the tax hangover:
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- Keep the cost per employee under $300, then no FBT will be due. This is because of something called the “minor benefits exemption”. This exemption also applies if spouses or partners come along to the party.
- The costs of a Christmas party (like food and drink) aren’t likely deductible but they are exempt from FBT if they are provided on a working day on business premises and consumed by current employees. So ditch the pub, have the Christmas Party on work premises in business hours and you could be saving lots of extra tax – woohoo.
Keep in mind there are a few factors that can impact things so best to chat to your accountant when you’re planning your holiday party.
For more on minor benefits, FBT, and entertainment expenses check out this article we wrote last month.
3. Seasonal Bonuses and Employee Benefits
- As a business owner, you can claim bonuses paid to employees as a deductible expense but remember to keep records of the amounts and reasons and report them through Single Touch Payroll (STP).
- If you give non-cash gifts or perks, like gift cards, hampers or merchandise you may need to pay Fringe Benefits Tax (FBT) if the value exceeds $300 (including GST) as long as they don’t qualify as entertainment
Some examples of employee benefits:
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- A company car
- Non-cash rewards, like a gift card
- Note: Tickets to shows or events would be classified as entertainment and wouldn’t be deductible, so be sure to keep that in mind. Check out our article from last month for more entertainment expenses and FBT.
4. Promotional Gifts and Sponsorships
- Promotional Gifts: These can be deductible if they are used to promote your business. Things like keep-cups, apparel and stationary. Just make sure you keep receipts and records of all promotional gifts, and that the items are branded with your business logo or contact information.
- Sponsorships: You can claim sponsorship expenses if they are directly related to your business’ activities, like promoting your brand or gaining exposure. The sponsorship also needs to include direct advertising, like your logo on event materials (think local bowls club) or media mentions (a shout out in the paper or on the radio for example). Be sure to document everything properly, including the purpose of the sponsorship and the amount spent, to support your claim.
5. Charitable Donations
- We all love giving back during the holidays – especially when you can claim a deduction! Donations to registered charities are tax-deductible year-round. Like with everything else, make sure you keep records of all donations. The deduction is limited to the amount donated, and you’ll need to get an official receipt from the charity in order to claim.
6. Travel Expenses
- Business Travel: Travelling for work during the silly season? You’re in luck. Travel expenses for business purposes, including your accommodation and meals, are deductible. As long as the travel is directly related to your business activities, of course!
For example, let’s say you’re a small business owner traveling to Sydney in December to meet with a supplier. You stay overnight because the meeting is early the next morning. Here’s what you can claim as a business expense:
- Flight tickets: The cost of getting to and from Sydney.
- Accommodation: A hotel room for the night.
- Meals: Dinner the night before and breakfast on the day of your meeting.
- Transport: Taxis or rideshares to and from the airport or meeting location.
To claim these deductions, make sure you keep all your receipts and write down details about the business purpose of the trip, like the date and who you met with. If part of the trip is personal (like sightseeing or staying extra days), only the business-related costs can be claimed.
- Holiday Travel: Sorry, travel expenses for personal holidays are not deductible. But there’s a loophole – if you combine business and personal travel, you can claim the portion related to business. Who says you can’t mix business with pleasure?
Conclusion: Stay Savvy, Save Money
The holiday season may be all about giving, but that doesn’t mean you have to give more to the tax office than you should. By understanding what you can (and can’t) claim—from gifts and bonuses to travel and Christmas parties—you can keep your business’ finances in good shape all year long.
We’ve kept these tips simple so you can plan ahead without the headache. Remember, whether it’s finding smart ways to mix business with pleasure or sorting through receipts, we’re here to help. Give us a call before you start swiping that AmEx —we’ll make sure you’re in the know and set up for success.
Have a question or comment?
If you have any questions or comments relating to this article (or any other accounting matter) please get in touch with us at [email protected] and we’ll be happy to assist you.
