Are Christmas alcohol gifts tax deductible for business owners in Australia?

Now that December is here, many business owners are preparing client, supplier and employee gifts. Alcohol is always a popular choice, but the tax treatment varies depending on who receives it and how the alcohol is being gifted. 

A common misconception that can lead to missed deductions or incorrect reporting, is that all alcohol gifts are tax deductible. 

When You Can Claim Alcohol 

Giving a sealed bottle of wine, whisky or champagne to clients or suppliers, the ATO normally treats these gifts as business expenses.  

This is because the purpose is to build goodwill, strengthen relationships and support the growth of your business. 

Reminder: 

• The cost may be tax deductible 

• You may be able to claim GST  

• The gift is viewed as part of your marketing or relationship building efforts 

When You Can’t Claim Alcohol 

Alcohol gifted to employees is usually considered entertainment. Entertainment expenses are generally not tax deductible and GST cannot be claimed. This is where many business owners get caught out. 

Reminder: 

• Gifts that count as entertainment usually cannot be claimed 

• The ATO treats alcohol for employees the same way it treats meals or social functions 

Sealed Bottle VS Drinks at an Event  

Sealed Bottle: 

• Usually treated as a gift 

• A deduction may apply depending on who receives it 

• Claiming the GST may be allowed 

Open alcohol or alcohol consumed at an event 

• Always treated as entertainment 

• Generally no deduction 

• No GST to claim 

Planning Your Christmas Gifts  

A clear understanding of tax rules allows you to prepare your gifting list. Before buying anything, consider two simple questions: 

• Who am I giving this gift to? 

• What is the purpose of the gesture? 

Do you need help understanding what is a tax deductible gift or not? 

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