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 proposed legislation 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 depends on whether the card is open loop or closed loop.

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

Inland Revenue’s 2025 guidance (QB 25/07) treated open-loop cards as employment income subject to PAYE, but legislation has been introduced to allow them to be treated as fringe benefits instead.

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 are typically treated as non-cash benefits, meaning they fall under the Fringe Benefit Tax (FBT) rules.

Proposed Changes to Gift Card Tax Rules in New Zealand

The Government has proposed changes under the Taxation (Annual Rates for 2025–26, Compliance Simplification, and Remedial Matters) Bill to simplify the tax treatment of gift cards.

The proposed changes to gift card tax in NZ include:

• All gift cards will fall within the FBT framework
• Employers may choose to treat gift cards under PAYE or FBT
• Gift cards will become a separate classified fringe benefit
• The FBT de minimis exemption will no longer apply to gift cards

These changes are expected to apply from 16 April 2025.

FBT on Gift Cards: What Employers Need to Know

Under current rules, some small employee gifts may qualify for the FBT de minimis exemption:

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

However, under the proposed changes, gift cards become a classified fringe benefit, meaning the exemption does not apply.

This means even small gift cards could trigger PAYE or FBT obligations for employers.

When Do Employee Gift Cards Require PAYE?

Some gifts must always be treated as employment income and taxed through payroll.

This includes situations where a gift card is:

• Given instead of a cash bonus
• Linked directly to employee performance
• Provided as a substitute for wages or salary

In these cases, the value must be processed through PAYE and included in the employee’s taxable income.

Are Corporate Gift Cards Tax Deductible?

Businesses can generally claim a deduction for corporate gifts, but the deductibility depends on whether the gift is entertainment.

Non-entertainment gifts are generally 100% deductible, while entertainment-related gifts are typically 50% deductible.

Gift Card Tax Planning for NZ Businesses

Gift cards remain a convenient way to reward staff, but the tax rules are changing. With the removal of the FBT de minimis exemption for gift cards, businesses may face additional tax obligations even for small staff gifts.

Businesses across New Zealand — particularly SMEs — should review their policies around staff gift cards and incentives to ensure they remain compliant with Inland Revenue rules.

Frequently Asked Questions

Are gift cards taxable for employees in New Zealand?

Yes. Gift cards provided to employees may be taxable under either PAYE or Fringe Benefit Tax (FBT) depending on the type of gift card and the circumstances in which it is provided.

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

Open-loop cards (such as Prezzy cards or prepaid Visa cards) can be used at multiple retailers, while closed-loop cards can only be used with a specific retailer or brand.

Do gift cards qualify for the FBT de minimis exemption?

Under proposed legislative changes, gift cards will no longer qualify for the FBT de minimis exemption, meaning even small gift cards may create a tax liability.

Do gift cards need to go through payroll?

If a gift card is provided as a substitute for salary or a performance bonus, it must be treated as employment income and taxed through PAYE.

Need advice on FBT or employee benefits?

The team at ABA helps businesses understand the tax rules for employee gift cards, FBT, and staff incentives, ensuring you remain compliant while still rewarding your team.

If you’re unsure about the FBT or PAYE treatment of employee gift cards in New Zealand, contact ABA to discuss the most tax-efficient way to structure staff rewards.