Tax payable on rewards and gift cards

May 26, 2025

If you get rewards for buying from a supplier, IRD wants to know

Gift cards and rewards given for buying from a supplier are considered taxable income by Inland Revenue.

Before Christmas, IRD shared its view on how these incentives should be taxed. To keep this article straightforward, we’re assuming you’re running a regular limited liability company. The same rules apply to sole traders, partnerships, and look-through companies, except fringe benefits do not apply to the owners – these rewards are simply taxable income.

Trading trusts are a bit different since they don’t have working owners. Instead, employees (including beneficiaries or settlors) get incomes subject to PAYE.

Gift cards

If you’re given a gift card that can be used almost anywhere (an open-loop card), it’s treated like cash because of its flexibility to be used anywhere.

Taxable income

If you give the card to an employee, it’s like giving them a bonus.

You’ll need to deduct PAYE on the “grossed-up” amount. For example, if the card is worth $200, you’d calculate how much you’d need to pay to give $200 after PAYE deductions and include this in your PAYE return.

If the card can be used only in specific places (a closed-loop card), the rules are different. It’s considered a fringe benefit, so the $300 per person per quarter limit applies.

If you’re a shareholder-employee and keep the card, it’s treated as an unclassified fringe benefit.

Products from suppliers

If you get a spending reward like a barbecue, it’s taxable income based on how much you could sell it for. If you use it in your business, it becomes a business asset. At the moment Inland Revenue is saying you cannot claim depreciation. We are hoping this policy will change. The department is also saying if you use the rewards to reduce your debt to the supplier, you don’t get a deduction for the cost. Again, we hope this will be changed.

If you give it to an employee, it’s an unclassified fringe benefit and follows the same rules as closed-loop cards.

GST

Rewards include GST, so you’ll need to pay GST on them.

For the supplier

Businesses giving out these rewards can usually treat the cost as tax-deductible.

Points

Some suppliers offer points instead of gifts. IRD hasn’t clarified how to treat these, but it’s likely the income applies only once the points are redeemed for a gift.

Please contact your Russell Turner adviser if you would like clarification on declaring rewards and gift cards.

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Budget 2025

May 26, 2025

Click to read the full report on the 2025 Budget.

Crypto-asset profits are taxable

March 7, 2025

Just a reminder – if you make a profit out of investing in crypto-assets, that profit is taxable income. Crypto-assets are cryptographically secured digital representations of value that can be transferred, stored or traded electronically. They use some form of distributed ledger technology such as blockchain. They are also known as cryptocurrencies, cryptographic assets, digital financial assets, digital tokens and virtual currencies. Inland Revenue’s rationale is that the only reason you could possibly have for investing in crypto-assets is to make a profit. There’s generally no other form of income. Unlike a rental property, you don’t get a combination of income and capital gain. However, some crypto-assets are paying a return on crypto held in the form of more crypto. In those cases there is an argument that it is purchased for that purpose not sale. Two key developments in the past year highlight the importance for taxpayers with crypto-assets to make sure their tax matters are in order – failure to do so could lead to an unpleasant surprise from Inland Revenue. In general, transactions involving sale, exchange, or trading of crypto-assets are taxable on realisation: when someone sells a crypto-asset, the proceeds from the sale are subject to tax, although they can deduct the cost of acquiring the asset. Sales can involve government-issued fiat currency (such as NZD) or be used to purchase another crypto-asset. This is a broad guideline, and specific tax rules may vary depending on the situation. If income is generated from crypto-asset activities, it must be included in a taxpayer's income tax return. For New Zealand tax residents, this applies even to crypto-assets bought or sold outside the country, such as when using a non-New Zealand-based crypto exchange. Development #1: Inland Revenue's focus on Crypto-assets In July 2024, Inland Revenue announced it would focus on investigating taxpayers who fail to report income from crypto-assets. The agency reminded the public that, contrary to the belief that transactions on the blockchain are anonymous, it has the tools and technology to track crypto-asset activity. With an additional $116 million allocated to compliance efforts in the 2024 Budget, taxpayers should expect an increase in inquiries and requests for information. The Commissioner of Inland Revenue confirmed that Inland Revenue would gradually reach out to crypto traders, informing them of the data the agency has and offering a final opportunity to report any unreported income. Inland Revenue’s system has identified 227,000 New Zealanders with crypto-assets and tracked 7 million transactions worth $7.8 billion. This is likely just the beginning, as Inland Revenue continues to gain access to more data related to crypto-asset activities. Development #2: The Crypto-Asset Reporting Framework (CARF) As part of the 2024 Budget, Inland Revenue received extra funding to create a Crypto-Asset Reporting Framework (CARF). According to the Regulatory Impact Statement (RIS), the decentralised nature of crypto-assets and limited regulation have made it difficult for tax authorities to fully track income generated from crypto activities. While Inland Revenue can monitor some transactions, a formal reporting system would provide a more efficient way to gather and oversee crypto asset data. CARF is an initiative led by the OECD. It’s a framework for a reciprocal international exchange of information on crypto-asset activity between jurisdictions. As a global minimum standard, all OECD countries are expected to adopt the framework, and as of May 2024, 50 countries had committed to participating. CARF will require crypto intermediaries to provide tax authorities with information about users on their platforms. This information will be automatically shared with other CARF-compliant jurisdictions. The data provided will include personal details (e.g., name, address, date of birth, and tax ID number), along with transaction details at both the user and aggregate levels. This data will cover crypto-to-crypto exchanges, crypto-to-fiat transactions, and transfers to wallet addresses on the blockchain. CARF will also establish rules for currency translation and asset valuation. For example, the value of the crypto-asset must be reported in the fiat currency in which it was either paid or received. CARF is expected to be implemented starting with the 2026/27 tax year, and the first data exchange will take place in 2027. The initiative is estimated to generate an additional $50 million in tax revenue annually from 2027/28 onwards. The RIS suggests Inland Revenue might begin pre-populating income tax returns with crypto-asset income, a process that could be made easier with tax reform aimed at simplifying the calculation of taxes on crypto-assets. Watch this space for potential legislative changes in the future! Do get in touch with your Russell Turner adviser if you have any questions on crypto-assets.