How to manage gift cards

The ACCC describes a gift card, sometimes called a gift voucher, as something usually loaded with an amount of money, which the person receiving it can exchange for goods or services up to that value. It can be a physical card, a voucher or a code sent electronically, and it can't usually be swapped for cash.

The ACCC groups gift cards with other discount vouchers, such as shopper dockets and loyalty stamp cards, and says a business must clearly state every condition and restriction on how a voucher can be used. business.gov.au lists gift cards and vouchers among the payment methods a business can accept, and notes that a business selling them has to comply with the gift card laws.

According to the ACCC, a business issuing gift cards must clearly state:

• every condition and restriction on using the card, including any limit on the number of transactions
• the card's expiry date
• the date by which it must be activated, for a card that needs activating
• whether it can be reloaded or topped up.

The ACCC says the expiry date must be displayed prominently. It identifies exceptions for reloadable cards and certain second-hand cards and supplies to charities or government agencies; check the conditions before relying on one. If the expiry is expressed as a period, show the issue date too. A card with no expiry must say so. Penalties can apply for breaking the rules.

The ACCC says a gift card bought on or after 1 November 2019 must be redeemable for at least 3 years from the day it was supplied or bought. It lists exceptions, including the categories below. Conditions apply, so check the ACCC guidance before relying on an exception:

• able to be reloaded or topped up
• given away for promotional purposes
• only redeemable for a particular good or service available for a limited period, such as a visiting performance, and expiring when that period ends
• only redeemable for a particular good or service and supplied at a genuine discount on its market value, such as the ACCC's discounted massage example
• part of an employee reward scheme or a customer loyalty program
• certain second-hand cards, subject to the conditions for that exception
• supplied with a purchase as part of a temporary marketing promotion, such as the ACCC's example of a voucher given when a customer buys a specified product
• supplied to certain charities or government agencies.

These categories are not blanket exemptions for every discounted card or every promotion. Confirm the conditions with the ACCC or seek legal advice before choosing a shorter expiry. The ACCC says a business isn't required to accept a gift card after a valid expiry date.

The ACCC says gift cards bought after 1 November 2019 can't include fees or charges the recipient has to pay once the card has been bought, and the card's terms can't allow them. It gives activation fees, account keeping fees, balance inquiry fees and inactivity fees as examples.

It doesn't count booking fees that are the same, or largely the same, as those charged for other payment methods, currency exchange fees, or fees for reissuing a lost, stolen or damaged card. As with the display rule, exceptions cover reloadable cards and certain second-hand cards and supplies to charities or government agencies. Confirm the applicable conditions with the ACCC before relying on an exception.

When you sell a gift card, money comes in but you haven't yet supplied anything for it. business.gov.au's glossary defines a liability as any financial expense or amount owed, and unused card value is an amount the business still owes its cardholders. Businesses usually record it in a liability account, such as gift cards outstanding. When the card is used, that amount comes off the liability and the goods or services supplied are recorded as a sale.

A card used in parts keeps its remaining balance in the liability account until the rest is spent. Cards sold at a discount, cards given away and balances left on expired cards all raise questions about how they appear in your accounts, and your accountant can tell you how to treat each.

The register tracks each card's unused redeemable value. Keep enough detail to reconcile that value to the liability recorded under the treatment agreed with your accountant. Record:

• the card number or code
• the date it was issued and its value
• its expiry date, or a note that it has none
• whether it was sold, given away or sold at a discount
• each use, with the date and amount
• the balance left on it.

At month end, reconcile the register to the liability account, allowing for the agreed treatment of discounted, promotional and expired cards and any other documented adjustments. Investigate the remaining differences while the month's records are to hand; do not assume every difference is a missing sale or redemption.

The ACCC says that if a business restricts trading and its gift cards can't be used because of a restriction the business itself placed on them, it should offer some form of remedy, such as extending the expiry date.

If a business changes hands, the ACCC says the new owner must honour existing gift cards when the business was sold as a going concern, with its assets and liabilities, or when it was owned by a company and the new owner bought the company's shares. A complete register shows what is owed on cards at the date of a sale, which both the seller and the buyer will want to know.