Gift Cards
What Businesses Need to Know in 2025–26
Gift Cards: What Businesses Need to Know in 2025–26
Gift cards are one of the most common ways businesses reward employees, incentivise customers, or manage rebate programmes. However, recent changes by Inland Revenue (IRD) and new consumer-protection laws mean the tax and compliance treatment of gift cards is undergoing major updates in New Zealand.
If your business issues, receives, or uses gift cards, it’s important to understand the new rules to avoid unexpected tax liabilities or compliance risks.
1. IRD now treats many gift cards as taxable benefits
In April 2025, IRD released updated guidance clarifying how gift cards and vouchers are to be treated for income-tax and fringe-benefit-tax (FBT) purposes.
Open-loop gift cards now treated like cash
General-purpose prepaid cards (such as Visa/Master card gift cards, Prezzy Cards, or other open-loop cards) are now treated the same as cash equivalents.
If an employer gives an employee an open-loop gift card:
It is taxable employment income
It must be processed through PAYE, or
The employer must account for FBT
The old approach of treating these as “minor, infrequent benefits” under the de minimis FBT exemption generally no longer applies.
Closed-loop retailer cards also tightened
Retailer-specific cards (e.g., Farmers, Noel Leeming, Supermarket gift cards) are also captured by the new rules. These may still fall under FBT rather than salary, but they are no longer automatically exempt.
The new framework gives employers a choice between PAYE and FBT, except when the gift card is really a substitute for wages — in which case PAYE must apply.
Rebates received as gift cards are now income
Businesses that receive gift cards or vouchers from suppliers (e.g., promotional incentives, rebates) must now treat these as business income, just as they would cash rebates.
This closes a previous grey area and removes the ability to treat supplier gift cards as non-taxable perks.
2. The changes apply retroactively from 16 April 2025
IRD has confirmed that the updated position applies from 16 April 2025, meaning:
Previously issued gift cards
Gift cards already received as rebates
Any unreported benefits
Any employer-provided vouchers given earlier in the year must be reassessed using the new rules.
Businesses should review the 2025–26 tax year to ensure payroll and FBT treatments have been correctly applied.
3. What you should do now
At present, open-loop gift cards are PAYE liable and treat them as extra wages, gross them up, run payroll, deduct tax. But soon ( when the Bill passes), you should have flexibility that you can choose either PAYE or FBT for gift cards (open- or closed-loop), unless they substitute for salary.
We recommend the following steps for businesses and employers:
1. Audit any gift cards provided during the 2025–26 year
2. Review FBT vs PAYE implications for your employee reward programme
3. Check supplier rebate agreements to identify gift card incentives
4. Update your accounting and payroll system rules
5. Prepare for new 3-year expiry requirements if you sell or issue gift vouchers
4. Need help?
Contact Metta Tax for personalized accounting solutions for your business needs.
Business WhatsApp :+64 22 542 8101
Email :info@mettax.co.nz