Gift cards – the perfect gift for that one person on your Christmas list that already has everything. With an estimated value of $2.5 billion worth of gift cards sold each year, you’re not alone if you rely on gift cards as a last-minute stocking stuffer. However, at present around $70 million is being lost due to gift cards expiring before a purchase can be made.
To help prevent this, new laws are being enforced Australia wide from 1 November 2019 to help reduce the amount being lost. With changes including a minimum three-year expiry on all cards, clearer disclosure requirements and banning post-supply fees, consumers will now have every opportunity to get the most gift from their card.
Three Year Expiration Period
Generous expiration dates can be a strong point of difference for consumers when they are deciding which retailers to purchase from. So, if you have a business where you provide a gift card purchase option, you may want to implement an extended expiration period.
All businesses must ensure that only compliant gift cards are available for purchase when the new law comes into effect at the end of 2019. It is recommended that current card stock should be run low and the current production reviewed in preparation for the changeover.
New disclosure requirements mean that expiration periods must be crystal clear. Gift cards will need to explicitly state the period of validity on the card. If you only have the month and year displayed, it will be assumed that the gift card will expire on the final day of the month. If the gift card never expires, this must also be clearly stated on the card.
Some examples of the required level of expiration date clarity are below:
No Post-Supply Fees Charged
No-ones likes hidden fees, and the final change that will be enforced will affect is post-supply fees. The full amount of the gift card price must be redeemable. Post-supply fees, such as activation fees, account keeping fees, balance enquiry fees and telephone enquiry fees are no longer able to be deducted from a gift card amount.
Other Things to Know
In regard to the tax implication of being a business that provides the option of gift card purchases, it’s important to remember that revenue is collected at the point of the initial sale, or when the gift card is purchased. If you’re purchasing an item for your business with a gift card, remember to retain a copy of the transaction to use as evidence to the Australian Taxation Office if required, and for ease of reconciling.
As a business owner, there are also heavy penalties that may apply if you refuse to comply with new legislation, including fines up to $30,000.00 for body corporate and up to $6,000.00 for individuals. If a business who has issued a gift card is sold or becomes insolvent, the gift card remains valid as the consumer’s rights are still valid. The gift card will either need to be honoured by the new owners or the consumer will become an unsecured creditor of the business.
If you want to know more about how this legislation change could affect your business, please contact us on 07 3367 3155 or by filling in our online form HERE.