When rewarding staff, many Australian businesses operating in New Zealand use prepaid “open loop” cards — a flexible, cash-like benefit that employees love.
But recent changes from Inland Revenue (IR) mean the tax treatment of these cards has shifted, and understanding the difference could save your business from compliance headaches.
If your Australian business provides open loop cards (like Visa or Mastercard gift cards) to New Zealand-based employees, here’s what you need to know about how the Fringe Benefit Tax (FBT) and PAYE rules now apply.
What Are “Open Loop” Cards?
An open loop card is a prepaid card that’s co-branded with a major payment network (such as Visa or Mastercard). It can be used anywhere that network is accepted, either online or in-store, until the preloaded balance is spent or the card expires.
These differ from closed loop cards, which can only be redeemed at specific retailers.
Inland Revenue’s 2025 Ruling
In April 2025, Inland Revenue issued QWBA QB 25/07, setting out its position that open loop cards given to employees should be treated as PAYE income, not fringe benefits. That meant employers needed to gross up the card’s value and deduct PAYE just like wages.
However because many employers had already treated these cards as fringe benefits and paid FBT, the Commissioner recognised the practical difficulties of enforcing this immediately. Inland Revenue’s operational statement confirmed it won’t pursue corrections for employers who used FBT treatment for periods ending before or during the 2025–26 tax year.
Proposed Law Change – A Practical Fix
To simplify compliance, Parliament has introduced the a Bill which retrospectively allows open loop cards to be treated as fringe benefits.
This means employers who continued using the FBT approach between 1 April 2025 and 31 March 2026 won’t face penalties. Inland Revenue has stated it will not allocate resources to challenge employers who applied FBT during this transitional period.
What This Means for Australian Businesses in NZ
For Australian-owned businesses with New Zealand operations or employees, this development offers welcome relief. Instead of adjusting payroll systems to capture PAYE on each card, businesses can continue using FBT reporting — provided the cards meet the open loop definition.
It’s also a reminder of how quickly New Zealand tax positions can shift. When operating across the Tasman, differences between the ATO’s and IR’s treatment of benefits like gift cards can lead to confusion if not managed properly.
Key Takeaways
- Open loop cards (e.g. Visa/Mastercard gift cards) are now treated as fringe benefits under proposed NZ law.
- No PAYE gross-up is needed for 2025–26 periods if you have already paid FBT.
- The law change will be retrospective, simplifying compliance.
- Employers should still review their benefit policies to ensure future consistency once the legislation is enacted.
Need Help Navigating NZ FBT Rules?
At NZ Tax Accountants Pty Ltd, our team of NZ-qualified specialists in Australia helps small business owners and their accountants stay compliant with New Zealand tax obligations — including FBT, PAYE, and cross-border payroll matters.
If your business provides staff benefits in New Zealand, contact us today to ensure you’re applying the correct FBT treatment.
The information in this article is indicative of NZ tax rules and changes and not intended to be complete for all intents or purposes and does not constitute advice. It is recommended that you obtain professional advice, suited to your particular circumstances, from us before acting on anything you read.