How Does GST Work on Gift Cards and Vouchers?

Gift cards and vouchers are common in Australian retail, hospitality, and service businesses, but their GST treatment isn’t always intuitive.

In many cases, you don’t need to deal with GST until the customer redeems the card or voucher. Let’s look at when this treatment applies and when accounting needs to be done differently.

• What is a gift card or voucher for GST purposes?
• What happens if the gift card can be used for both taxable and GST-free items?
• What if the customer spends more than the gift card value?
• What if only part of the gift card is redeemed?
• What happens if a gift card expires without being used?
• Is selling a gift card the same as earning revenue?
• Are gift cards the same as discount vouchers?
• What if you sell a $100 voucher for more than $100?
• What about discounted gift cards?
• What about vouchers for a specific product or service?
• What if another business sells or distributes your gift cards?
• Do customers get a tax invoice when they buy a gift card?
• How do gift cards affect your BAS?
• How should gift card sales be recorded?
• Gift card GST and accounting checklist
• When should you get accounting or GST advice?
• FAQs

What is a gift card or voucher for GST purposes?

GST on gift cards in Australia can be a little tricky. For GST purposes, the starting point isn’t what you call a product. A business may call something a “gift card”, “voucher”, “coupon” or “store credit”, but the GST outcome depends on whether it meets the relevant tax rules under Division 100.

A qualifying face value voucher should have a stated monetary value and entitle the holder to redeem goods or services up to that value. Examples include:

• A $100 store gift card
• A $50 restaurant voucher
• A prepaid service voucher with a stated monetary value

This is different from:

• Percentage-off coupons
• “One free service” vouchers
• Loyalty rewards
• Store credits
• Free promotional vouchers

The exact terms of each arrangement matter. Don’t assume that every product marketed as a voucher receives the same GST treatment.

Do you charge GST when you sell a gift card?

Usually, no. A qualifying face value voucher isn’t considered a taxable supply. GST applies when the customer redeems the gift card to buy taxable goods or services.

For example, if a customer buys a $100 gift card for $100, you don’t need to record $9.09 of GST simply because $100 cash has entered the business.

When does GST apply to a gift card?

As mentioned earlier, there is no GST on vouchers directly. Instead, GST is charged when the gift card is redeemed.

For example:

• A $100 gift card is redeemed for taxable goods, so GST applies to the taxable supply at redemption.
• A $100 gift card is redeemed for GST-free goods, so GST doesn’t apply to that supply.

This is why the point of redemption matters. You need to consider what the customer actually receives, rather than treating the full gift card value as taxable when the card is first sold.

Gift card GST example

Consider the lifecycle of a $100 qualifying gift card:

1. The customer buys a $100 gift card. GST doesn’t apply.
2. The customer later redeems $80 against taxable goods. GST applies to the $80 taxable supply.
3. $20 remains available on the card. The business keeps the $20 as an outstanding voucher balance.
4. The customer later redeems the balance or leaves it unused. If redeemed, GST is assessed based on the underlying supply. If unused, the business considers the separate GST and accounting treatment for the expired or unredeemed balance.

What happens if the gift card can be used for both taxable and GST-free items?

A general-purpose gift card may be used for different types of supplies. For example, a retailer may sell both taxable merchandise and GST-free products.

GST applies depending on the goods or services the customer buys. For instance, if a customer uses a $100 gift card to buy $80 of taxable merchandise and $20 of GST-free products, the GST treatment should reflect that split at redemption.

What if the customer spends more than the gift card value?

If the customer pays more than the gift card value, the additional amount forms part of the consideration for the goods or services supplied on redemption.

For example:

• Gift card value: $100
• Purchase total: $150
• Additional customer payment: $50

As before, GST applies to the actual supply purchased, including the voucher value and the additional payment as relevant. The additional $50 is not treated as a separate, unrelated amount.

What if only part of the gift card is redeemed?

Partial redemption can create an outstanding balance. For example, a customer has a $100 gift card and spends $60. The remaining balance is $40.

The business should keep records showing:

• The original voucher value
• The amount redeemed
• The remaining balance
• The GST associated with the actual taxable supply on redemption

The remaining balance remains an obligation to supply goods or services in the future, subject to the voucher’s terms.

What happens if a gift card expires without being used?

For an unused gift card, GST doesn’t usually apply to the unused amount. This assumes the voucher met the definition of a face-value voucher under Division 100 at the time of sale.

For specific technical details on Division 100 voucher treatment and GST on expired gift cards, refer to ATO Ruling GSTR 2003/5.

For bookkeeping purposes, be sure to account for unredeemed balances or liability adjustments separately upon expiration. Seek professional accounting advice when dealing with material breakage.

Is selling a gift card the same as earning revenue?

No. Receiving cash for a gift card isn’t the same as earning revenue from a completed sale.

When you sell a gift card, you receive cash, but still have an obligation to provide goods or services later. So gift card revenue recognition happens after you provide those.

In practice, it’s best to track gift card proceeds separately from ordinary completed sales.

Are gift cards the same as discount vouchers?

No. A discount voucher may simply reduce the price of a future purchase, rather than represent stored monetary value that has already been paid for.

For example:

• A $100 gift card means the customer has prepaid $100 of spending value.
• A 20% off voucher doesn’t necessarily mean the customer has prepaid anything; it alters the price of a future transaction.

This distinction can materially affect GST treatment.

What if you sell a $100 voucher for more than $100?

If you receive more money for a voucher than its face value, the excess may constitute a taxable supply.

For example:

• Voucher stated value: $50
• Customer pays: $61
• Excess: $11

The $11 excess may have separate GST consequences when the voucher is sold.

What about discounted gift cards?

A discounted gift card is different from a gift card sold above its face value.

For example, a $100 voucher sold for $90 doesn’t automatically create GST simply because the voucher has been discounted.

The key consideration is whether it remains a qualifying face value voucher and how Division 100 applies to its stated monetary value.

What about vouchers for a specific product or service?

A voucher stating “$100 to spend in store” isn’t the same as “one massage” or “one dinner for two”.

The latter represents a right to a specific supply rather than a voucher with a stated monetary value that qualifies for Division 100 treatment.

Businesses should assess whether:

• A monetary value is stated
• The holder can choose the goods or services
• The voucher meets Division 100 requirements
• The underlying supply is taxable

There is no blanket GST outcome for every specific product or specific service voucher. The terms and nature of the supply need to be considered.

What if another business sells or distributes your gift cards?

If another business sells or distributes gift cards on behalf of an issuer, the arrangement may involve more than one transaction.

You need to distinguish among:

• The issuer, which ultimately provides the goods or services when the card is redeemed
• The distributor, which sells or distributes the gift card
• Any commission or distribution fee payable to the distributor
• The party that makes the underlying supply on redemption
• GST on commissions or service fees
• Settlement records between the parties

The gift card value and the distributor’s commission are separate transactions and may be subject to different GST treatment.

Do customers get a tax invoice when they buy a gift card?

Buying a gift card isn’t the same as purchasing a taxable good.

Your business will need to provide appropriate evidence of the gift card purchase. However, the initial gift card receipt does not necessarily include a GST amount simply because the issuer is GST-registered.

When the voucher is redeemed for a taxable supply, the normal tax invoice requirements can apply to that underlying transaction.

How do gift cards affect your BAS?

For Business Activity Statements (BAS), you need an accounting system to distinguish:

• Gift cards sold
• Taxable supplies made when vouchers are redeemed

Otherwise, there is a risk of:

• Reporting GST too early
• Reporting GST twice
• Missing GST on redemption
• Incorrectly treating unused balances
• Reconciling gift card cash receipts as ordinary sales

The BAS treatment should follow the underlying GST event. Since selling a gift card doesn’t usually trigger GST, BAS reporting will follow redemption where appropriate.

How should gift card sales be recorded?

Your gift card accounting records should separately identify:

• Gift cards sold
• Cash received
• Outstanding or unredeemed voucher balances
• Vouchers redeemed
• Goods or services supplied on redemption
• GST on taxable redemptions
• Expired or unused balances

A simple flow is:

1. Gift card sold: Record the cash received and the outstanding voucher obligation.
2. Gift card redeemed: Recognise the underlying sale and apply the relevant GST treatment.
3. Balance remains: Keep the unused amount identifiable until it is redeemed, expires, or is otherwise resolved.

Gift card GST and accounting checklist

• Identify whether the product is actually a voucher for GST purposes.
• Check whether it has a stated monetary value.
• Confirm whether Division 100 applies.
• Keep gift card sales separate from ordinary sales.
• Track each redemption.
• Apply GST based on the underlying supply.
• Track partial balances.
• Separate additional payments made on redemption.
• Identify expired or unredeemed balances.
• Record promotional vouchers separately.
• Separate distributor commissions and fees.
• Reconcile outstanding gift card balances regularly.
• Get tax advice where the voucher structure is unusual.

When should you get accounting or GST advice?

Seek accounting or GST advice where:

• Vouchers can be redeemed against both taxable and GST-free products.
• Cards are sold at a premium or through complex discount arrangements.
• There are substantial unused balances.
• The business operates through third-party gift-card platforms.
• The business has historically charged GST on gift card sales.
• GST may have been reported both at the time of sale and at redemption.
• Vouchers are for specific services rather than a stated monetary value.
• You’re unsure whether Division 100 applies.

Navigating GST on gift cards and vouchers requires careful distinction between sales, redemptions, and unused balances to ensure compliance and accurate financial reporting.

To keep your accounting seamless and stay fully compliant, consider partnering with Lawpath for expert tax planning services and tailored business advice.

FAQs

Do gift cards have GST in Australia?

Gift cards can involve GST, but usually not when they’re sold. For a qualifying face value voucher, GST is generally dealt with when the card is redeemed for a taxable supply.

Do you charge GST when selling a gift card?

Generally, no, if the gift card is a qualifying face value voucher sold for no more than its stated value. GST is usually dealt with when the card is redeemed.

When is GST payable on a gift voucher?

For a qualifying face value voucher, customers pay GST when they redeem it for a taxable supply. The underlying goods or services determine the outcome.

What is a face value voucher?

A face-value voucher has a stated monetary value and can be redeemed for a reasonable selection of goods or services up to that value. A $100 store gift card is a common example.

Does GST apply when a gift card is redeemed?

Yes, GST can apply when the card is redeemed, depending on what the customer buys. Taxable supplies attract GST, while GST-free supplies do not.

What if a gift card is used for GST-free goods?

GST doesn’t arise on that part of the transaction. The business should apply GST based on the actual supply.

What happens to GST on an expired gift card?

You should consider this issue separately. It doesn’t simply become a GST event merely because the card has expired.

Do you pay GST on unused gift-card balances?

Not automatically. The GST treatment depends on the voucher’s Division 100 status and how the unused balance is dealt with in the accounts.

How do you account for gift-card sales?

Record the cash received and the outstanding voucher obligation separately from ordinary sales. Then track each redemption and apply GST based on the underlying supply.

Is a discount voucher the same as a gift card for GST?

No. A discount voucher may reduce the price of a future purchase, while a gift card usually represents prepaid spending value. This difference can affect the GST treatment.

What happens if a customer spends more than the gift-card value?

The extra amount they paid is subject to GST. GST is assessed based on the actual transaction, including that additional payment.

Does GST apply to free promotional vouchers?

It can, but it may be treated differently since the voucher is free. Record promotional vouchers separately from gift cards.

Sources: https://www.ato.gov.au/law/view/document?docid=GST/GSTR20035/NAT/ATO/00001