Tax Updates: 10 February 2025

Welcome to this week’s review of tax issues where Richard comments on what’s been happening in the world of tax over the past week. If you have a question or would like a second opinion on any national or international tax issues, please contact Richard via email at richard@gilshep.co.nz.

Air NZ Airpoints ruling

I’m still playing catch-up on my readings from the beginning of the year, and I recently noted a product ruling issued by Inland Revenue (IR), which may be very topical to many. This is particularly relevant where you have clients who pay for their employees’ air travel costs, but the employee receives the benefit of the associated air points earned, personally being the Member of the Air New Zealand (Air NZ) Airpoints programme.

Now, firstly, you should note that the ruling does not apply to all Airpoint scenarios. For example, redemptions from Shairpoints Accounts or business owners (sole traders, shareholder-employee, partnership partners, LTC owners, etc) whose work-related travel is paid for by the business, etc.

I expect you are aware of how the scheme works – the employee becomes an Airpoints Member (for free), earns points through qualifying flights and purchases, and then those points have an equivalent NZD value, which the Member can then redeem for air travel and rewards. Note that the Airpoints Dollars are not convertible into cash in any circumstances. Unless the Member has points protection, the Airpoints expire four years after accruing to the Member’s account.

So, what are the potential tax issues for the employer, or their employee then?

Well, the product ruling provides that:

• Members do not have income under any of sections CE 1, CB 1, CB 3, CB 4, CB 5, or CA 1(2) of the Income Tax Act 2007 when they receive Airpoints Dollars or rewards on the redemption of Airpoints Dollars, arising from work-related travel paid for, or reimbursed, by their employers; and,

• The receipt by Members of Airport Dollars and rewards under the Airpoints Programme from work-related travel paid for, or reimbursed, by their employers is not a fringe benefit as defined in section CX 2(1) of the Income Tax Act 2007, and employers of Members are not liable to pay FBT (fringe benefit tax) under section RD 26 of that same Act.  

The ruling is for a definite period, only having an application period of 1^st October 2024, to 30^th September 2028.

This article was originally published through the ‘A Week In Review’ newsletter. If you would like to receive Richard’s tax updates every Monday morning, you can subscribe here.