Many businesses have long assumed that giving staff members Prezzy cards or similar gift cards could be treated under the Fringe Benefit Tax (FBT) rules. The thinking was that the de minimis exemption applied, meaning that if the gifts were small and occasional, no FBT was payable – effectively making these gifts “tax free”.

At the same time, other businesses have been receiving rebates or points from suppliers (for example, by paying for work items on account with hardware or trade suppliers) and treating these as non-taxable perks.

The Inland Revenue’s new guidance (QB 25/07, issued 16 April 2025) changes this understanding.

Key changes from IRD

1. Prezzy Cards and other “open loop” gift cards

• Prezzy cards, Visa, Mastercard or similar open-loop cards are now treated as cash.
• When given to employees, they are employment income, not fringe benefits.
• That means PAYE must be withheld, and there is no de minimis exemption available.
• Employers need to gross-up the value and pay PAYE just as if they had paid a cash bonus.

NOTE: Likely policy whiplash on open-loop cards. The government has indicated it will introduce legislation to reverse the IRD’s recent decision on open-loop gift cards (such as Prezzy Cards). This would bring them back under the FBT regime, effectively undoing the current QB 25/07 guidance, which treats open-loop cards as cash subject to PAYE. While the change is still at proposal stage and must go through the legislative process, employers should be aware of possible compliance shifts.

2. Closed loop cards and products

• Closed loop gift cards (e.g. Mitre 10 gift cards or Westfield vouchers) and products provided to staff are treated as fringe benefits.
• The normal FBT rules apply, including de minimis thresholds.

3. Supplier rebates and points

• Any rebates, products, or gift cards received from suppliers (such as through loyalty programmes or bulk purchasing rewards) are income to the business.
• If these are passed on to employees, they trigger the PAYE or FBT rules outlined above.
• If given to shareholders (not in their capacity as employees), they are treated as dividends, with no company deduction allowed.

What about past practice?

IRD recognises that many employers have mistakenly treated open-loop gift cards (like Prezzy cards) as fringe benefits in the past. The Commissioner has confirmed they will not go back and correct prior returns where employers have returned FBT on these cards in periods ending on or before the release of this guidance (16 April 2025).

What this means for businesses

Going forward: Prezzy cards and similar must be run through the PAYE system. No more relying on the FBT de minimis exemption.

Rebates and rewards: Treat them as business income first, then apply the correct rules if passed on to staff or shareholders.

Past practice: If you’ve previously returned FBT on Prezzy cards, you don’t need to amend old returns.

Many businesses will need to update their payroll and accounting processes to stay compliant with these changes. If you’ve been giving out Prezzy cards or earning supplier rebates, now’s the time to review your approach.