Many New Zealand businesses give employees gift cards as Christmas presents, staff rewards, or incentives. However, the tax treatment of gift cards in NZ can be complicated, particularly when it comes to Fringe Benefit Tax (FBT) and PAYE.

Recent legislation changes affecting open-loop and closed-loop gift cards means employers may need to reconsider how employee gift cards are provided.

Understanding the gift card tax rules in New Zealand can help businesses avoid unexpected PAYE or FBT liabilities.

Open Loop vs Closed Loop Gift Cards (NZ Tax Rules)

The tax treatment of gift cards in New Zealand has changed following legislative updates effective 16 April 2025.

While the distinction between open loop and closed loop cards is still relevant commercially, both are now broadly aligned for tax purposes.

Open Loop Gift Cards

Open loop cards can be used at multiple retailers and operate on payment networks such as Visa or Mastercard.

Examples include:

• Prezzy Cards
• Prepaid Visa gift cards
• Prepaid Mastercard gift cards

Previously, Inland Revenue guidance (QB 25/07) treated open-loop cards as employment income subject to PAYE.

From 16 April 2025, open-loop gift cards can instead be treated as fringe benefits (FBT), unless they are provided as remuneration.

Closed Loop Gift Cards

Closed loop cards can only be used with a specific retailer or brand.

Examples include:

• Supermarket gift cards
• Westfield vouchers
• Retail-specific gift cards

These have historically been treated as non-cash benefits subject to Fringe Benefit Tax (FBT), and this treatment continues under the updated rules.

Updated Tax Treatment of Gift Cards in New Zealand

Under the Taxation (Annual Rates for 2025–26, Compliance Simplification, and Remedial Matters) Act, the rules have been simplified and standardised.

Key points:

• Both open-loop and closed-loop gift cards can be treated under the FBT regime
• Gift cards are generally treated as unclassified fringe benefits
• Employers may still choose to apply PAYE, particularly where this is simpler or more appropriate
• The rules apply from 16 April 2025

FBT on Gift Cards: What Employers Need to Know

Gift cards provided to employees can generally be treated under either the FBT or PAYE rules, at the employer’s discretion.

However, where a gift card is provided as part of an employee’s remuneration (for example, a bonus or incentive), it must be treated as employment income and taxed through PAYE

Importantly, because gift cards are treated as unclassified benefits, they can still qualify for the FBT de minimis exemption.

FBT De Minimis Thresholds

The exemption may apply where total unclassified benefits provided are below:

• $300 per employee per quarter, and
• $22,500 per year across all employees

If these thresholds are exceeded, FBT will apply to the full value of the benefits.

When Do Employee Gift Cards Require PAYE?

Some gift cards must still be treated as employment income and taxed through payroll.

This includes situations where a gift card is:

• Provided instead of salary or wages
• A cash bonus substitute
• Linked directly to performance or KPIs
• Part of a remuneration or incentive scheme

In these cases:

• PAYE must be applied
• FBT treatment is not appropriate

Are Corporate Gift Cards Tax Deductible?

Businesses can generally claim a deduction for gift cards provided to employees.

•  Non-entertainment gifts → typically 100% deductible
•  Entertainment-related gifts → typically 50% deductible

Any associated FBT or PAYE cost is also generally deductible.

Gift Card Tax Planning for NZ Businesses

Gift cards remain a simple and popular way to reward staff, and the new rules provide greater flexibility.

However, businesses should be aware that:

• Gift cards are now more clearly within the FBT framework
• The de minimis exemption may still apply, but must be monitored carefully
• PAYE still applies where the gift is effectively remuneration

Employers should review:

• Staff reward and incentive policies
• Whether to apply FBT or PAYE
• Tracking systems for low-value benefits

This is particularly important for SMEs that regularly provide staff gifts.

Frequently Asked Questions

Are gift cards taxable for employees in New Zealand?

Yes. Gift cards are taxable either under FBT or PAYE, depending on how they are provided.

What is the difference between open-loop and closed-loop gift cards?

Open-loop cards (e.g. Prezzy or prepaid Visa cards) can be used at multiple retailers, while closed-loop cards are limited to a specific retailer or brand.

From 16 April 2025, both are generally treated similarly for tax purposes.

Do gift cards qualify for the FBT de minimis exemption?

Yes. Gift cards are generally treated as unclassified benefits, meaning they can qualify for the FBT de minimis exemption, subject to the usual thresholds.

Do gift cards need to go through payroll?

Only if they are effectively remuneration (e.g. bonuses or incentives). Otherwise, they can be treated under FBT.

Need advice on FBT or employee benefits?

The team at ABA helps businesses navigate the tax rules for employee benefits, including gift cards, FBT, and payroll obligations.

If you’re unsure how to treat employee gift cards under the updated rules, contact ABA to ensure you remain compliant while still rewarding your team effectively.