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Gift Cards, Tax & Your Business: What the new IRD rules mean for you


Thinking about rewarding your team or saying thanks to a loyal customer with a gift card? Recent IRD guidance has clarified exactly how these gestures are treated for tax purposes - and the small details really matter.


Here’s what every small business should know to stay onside with IRD and make the most of the tax deductions available.



🛍️ Gift Cards Are Now Split Into Two Categories


IRD now officially distinguishes between two types of gift cards:


  • Open Loop Gift Cards: These can be used almost anywhere — think Prezzy Cards or Visa/Mastercard gift cards. IRD considers these the same as cash.


  • Closed Loop Gift Cards: These are store-specific — like Mitre 10, Bunnings, or The Warehouse gift cards. IRD still treats these as traditional vouchers.















💼 If You Receive a Gift Card as a Business…


If your business earns a gift card (or other reward) from a supplier as part of a rebate or promotion, it’s taxable income — just like a cash rebate.


  • Open or closed loop, the full face value must be included in your income.


  • If it’s a physical product instead (like a TV, BBQ or even a car), you must declare its second-hand market value as income. GST applies too — the value is GST-inclusive.


Tip: If you use the reward in your business (say, a Mitre 10 voucher for office shelving), you may be able to claim the cost back as a business expense.



👥 If You Give Gift Cards to Staff…


This is where the open vs closed loop distinction becomes crucial:


Type of Gift Card

Tax Treatment

Can you deduct the cost?

Open Loop (Prezzy)

PAYE – must be included in wages like a cash bonus

✅ Yes

Closed Loop (Mitre 10)

FBT – may fall under the $300 per quarter per employee de minimis threshold

✅ Yes

Physical Products

FBT – market value of product. May fall under the $300 per quarter per employee de minimis threshold

✅ Yes


PAYE gifts must be included in your payroll and taxed as employee income.
FBT gifts must be included in your FBT return — unless under the $300 threshold (per employee, per quarter), where FBT doesn’t apply.

 👨‍👩‍👧 If You Give Gift Cards to Shareholders (Who Aren’t paid a Shareholder or PAYE salary)…


Be careful here. IRD says these are dividends — no tax deduction for your business, and the shareholder must pay tax on the value.


📌 Key point: You’ll be double-taxed — once at the company level (no deduction), and again by the shareholder.



💡 What Should You Do Next?


  1. Review your current gift-giving practice

    If you're handing out Prezzy Cards, those need to go through payroll now.


  2. Choose your gift card types wisely

    Closed loop gift cards may still fall under the FBT exemption threshold — easier admin and potentially no extra tax cost


  3. Keep good records

    Make sure all rewards received or gifted are properly accounted for — especially if they’re from supplier promotions.


  4. Talk to us before gifting high-value items

    Jet skis and BBQs are great, but the tax consequences can be complex!




🌈 The Silver Lining


Most gifts are tax-deductible when given to staff — as long as you follow the rules. And with smart planning, you can still reward your team meaningfully without blowing out your compliance workload.


Got questions about how this affects your business or how to handle PAYE vs FBT correctly?


We’re happy to help.

Get in touch before your next staff shout or customer promo – we’ll help you stay on the IRD’s nice list.





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