Not all gift cards are treated equally for tax purposes. IRD distinguishes between open-loop and closed-loop cards
Open-loop gift cards → PAYE applies
These are cards such as Visa, Mastercard or Prezzy cards that can be used almost anywhere. Because they operate just like cash, IRD treats them as monetary remuneration and requires PAYE to be paid on them.
Closed-loop gift cards → Usually treated as non-cash benefits (FBT rules)
These are store- or mall-specific gift cards such as Farmers, petrol stations, supermarkets, or Westfield-type cards. They cannot be redeemed for cash and are normally treated as non-cash fringe benefits.
Please let us know if you have any questions regarding this.
