Commissioner’s operational position on the FBT treatment of open loop cards provided by employers to employees
On 16 April 2025, the Commissioner issued Questions we've been asked (QWBA) QB 25/07 What is the income tax treatment of gift cards and products provided as trade rebates or promotions?
This QWBA states the Commissioner's view of the correct tax treatment for when an employer provides an open loop card (as defined in the QWBA) to an employee. The employer should gross up the face value of the open loop card given to an employee and return PAYE on that amount. During consultation for the QWBA, the Commissioner learned that employers often treated open loop cards as a fringe benefit and returned them for fringe benefit tax (FBT). As a result, the QWBA advised that the following decision had been made regarding the past treatment of open loop cards:
Past treatment of open loop cards
[76.] The Commissioner acknowledges that some employers have been incorrectly treating open loop cards provided to employees as fringe benefits (and subject to the FBT rules) and not the payment of money (and PAYE income payments). The Commissioner will not apply resources to correct previous tax positions taken in return periods ending on or before the date of this statement where an employer has incorrectly treated the provision of an open loop card to an employee as a fringe benefit and returned FBT on that basis.
Since the release of the QWBA, Parliament has proposed amendments to the law to allow open loop cards to be treated as a fringe benefit. This amendment is part of the Taxation (Annual Rates for 2025–26, Compliance Simplification, and Remedial Measures) Bill (199-1) that will be enacted before 31 March 2026. The amendment will be retrospective.
The Commissioner recognises that immediate implementation of the position outlined in the QWBA would be difficult for employers for tax positions taken after the date of issue of the QWBA and before amendment of the law. This is due to required changes to, for example, computer systems, payroll systems and accounting records. The Commissioner also notes that such changes would only be required for a short time given the amendment’s retrospective effect.
Therefore, the Commissioner will also not apply resources to determining whether an employer taxpayer has applied the position outlined in the QWBA correctly for the PAYE periods that cover 1 April 2025 to 31 March 2026. This position only applies where the employer has returned fringe benefit tax on the provision of open loop cards during this period.