Gift Cards and Tax Treatment: What New Zealand Employers Need to Know

Gift cards are a popular way to reward your team — whether it’s for Christmas, hitting targets, or simply saying thank you.

However, from 16 April 2025, Inland Revenue updated how gift cards are taxed. The key takeaway is simple: not all gift cards are treated the same, and choosing the wrong type can lead to unexpected tax costs.

At first glance, giving a gift card seems straightforward. But depending on the type of card, you may need to pay:

• PAYE (through payroll), or

• Fringe Benefit Tax (FBT)

Understanding the difference can help you reward staff in the most cost‑effective way.

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The Key Difference: Where Can the Card Be Used?

The tax treatment comes down to one important question:

Can the card only be used in certain stores, or almost anywhere?

Store‑Specific Gift Cards (Usually No Tax)

These are gift cards that can only be used at certain stores.

Examples:

• Supermarket vouchers

• Mitre 10 or Bunnings cards

• Restaurant, spa, or gym vouchers

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Good news:
If the value is small, there’s usually no tax to pay.

The limits are:

• Up to $300 per employee per quarter, or

• Up to $1,200 per employee per year

• Plus an overall business limit of $22,500

If you stay under these limits, you generally don’t pay FBT.

Important: If you go over the limit, tax applies to the full amount, not just the part over the limit.

Prezzy, Visa & Mastercard Gift Cards (Always Taxed)

These types of cards can be used almost anywhere and are treated like cash.

Examples include:

• Prezzy cards

• Visa or Mastercard gift cards

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What’s changed?

From 16 April 2025, these cards no longer qualify for any exemptions. This means tax always applies, no matter how small the value.

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Your Two Options for Taxing These Cards

If you provide these “cash‑like” gift cards, you can choose how to handle the tax:

Option 1: Put it through payroll

• Treated like wages

• PAYE and other deductions apply

• Reported in your normal payroll process

Option 2: Pay FBT

• The business covers the tax

• Often results in a higher cost overall

Gift cards are still a great way to reward staff — but a small change in the type of card you give can make a big difference to the tax outcome.

With a bit of planning, you can keep things simple, avoid surprises, and minimise costs.

If you’re unsure which option is best for your business, or want help structuring staff rewards in a tax‑efficient way, feel free to get in touch — we’re here to help.

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AQ: Gift Cards and Tax in New Zealand

1. Are gift cards taxable in New Zealand?

It depends on the type of gift card. Some store‑specific vouchers may be tax‑free, while cash‑like cards are always taxable under PAYE or FBT.

2. What changed with gift card tax rules in 2025?

From 16 April 2025, Inland Revenue confirmed that cash‑like gift cards (e.g. Prezzy, Visa, Mastercard) no longer qualify for exemptions. These are now always taxable, regardless of value.

3. What determines how a gift card is taxed?

The key factor is where the card can be used:

• Limited to specific stores → may qualify for FBT exemptions
• Usable almost anywhere → treated like cash and always taxable

4. Which gift cards are usually tax-free?

Gift cards that can only be used at specific retailers may be tax-free if they fall within FBT exemption limits, such as:

• Supermarket vouchers
• Hardware store cards (Mitre 10, Bunnings)
• Restaurant or spa vouchers

5. What are the FBT exemption limits?

Store‑specific gift cards may be exempt from FBT if:

• They are $300 or less per employee per quarter, and
• $1,200 or less per employee per year, and
• The total provided to all staff is under $22,500 per year

6. What happens if we exceed the exemption limits?

If you exceed the thresholds:

• FBT applies to the full value, not just the excess
• This can significantly increase the cost of providing the benefit

7. Which gift cards are always taxable?

Cards that function like cash are always taxable, including:

• Prezzy cards
• Visa gift cards
• Mastercard gift cards

8. How are taxable gift cards treated?

You have two options:

Option 1: PAYE (through payroll)

• Treated like wages
• PAYE and deductions apply
• Processed in payroll

Option 2: FBT (employer pays)

• Business pays the tax
• Typically higher total cost

9. Which option is better: PAYE or FBT?

It depends on your goals:

• PAYE → simpler and often lower cost
• FBT → employees receive full value, but costs employer more

A quick comparison can help determine the most cost‑effective option.

10. Are small gift cards still tax-free?

Only if they are store‑specific AND within FBT limits.
For cash‑equivalent cards, tax applies no matter how small the amount is.

11. Why are cash‑like gift cards taxed differently?

Because they can be spent almost anywhere, Inland Revenue treats them as equivalent to cash or salary, making them taxable.

12. What are the most common mistakes employers make?

Common pitfalls include:

• Assuming all gift cards are tax-free
• Using Prezzy/Visa cards without applying tax
• Exceeding FBT thresholds unknowingly
• Not tracking total benefits across employees

13. How can employers minimise tax on staff rewards?

To keep costs down:

• Use store‑specific vouchers within limits
• Track benefits carefully throughout the year
• Plan rewards in advance
• Choose PAYE vs FBT strategically

14. Are gift cards still worth using?

Yes — they’re still a great way to reward staff. However, choosing the right type of card is essential to avoid unnecessary tax costs.

15. What should we do if we’re unsure?

If you're unsure about the tax treatment or best approach, it’s worth getting advice. A small change in how you structure rewards can make a big difference to compliance and cost.

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