New laws on gift cards – what you need to know now

Gift card expiry in the spotlight 8 min read

Federal laws imposing a three-year minimum expiry date on gift cards sold in Australia came into effect last week, but certain state laws relating to gift card expiry dates also remain. This Insight explains the key principles businesses need to know about, and includes a quick guide to how the laws compare.

Key takeaways

• If you carry on business in New South Wales and South Australia, you should comply with both federal and state laws. Refer to the below table for a quick-shot comparison of the laws.
• Along with the three-year validity requirement, the federal laws have an additional requirement to prominently display the gift card's expiry date.
• There are a number of other differences in the application of the federal laws that businesses need to be aware of, including the definition of a 'gift card' and the higher penalties imposed.

Federal legislation

Overview

Legislation passed in October 2018 amended the Australian Consumer Law (the ACL) to provide a national framework for gift cards sold in Australia. The new federal laws apply to gift cards sold from 1 November 2019 and include three main requirements:

• Validity Requirement – gift cards must be valid for at least three years. Any term or condition that has the effect of reducing the validity period to less than three years will be void;
• Display Requirement – gift cards must prominently display the gift card expiry date, or the words 'no expiry date' if the card will not expire; and
• Post-Supply Fee Prohibition – post-supply fees are prohibited, except for some acceptable fees, which are specified in the Regulations.

The federal law defines a 'gift card' as an article that is commonly known to be a gift card or voucher, whether in physical or electronic form, and is redeemable for goods and services.¹ The Explanatory Memorandum to the new law suggests the following items are not commonly known as gift cards (and therefore will not be bound by the new laws): credit, charge and debit cards; public transport tickets; buy a certain number get one free-style customer loyalty cards (eg coffee cards); discount offers; and advertising material.

In relation to post-supply fees, the Regulations provide that the following fees are not post-supply fees, and are therefore permissible:

• fees for making a booking (irrespective of payment methods);
• fees for foreign currency transactions;
• fees for the reissue of a lost, stolen or damaged card; and
• payment surcharges.

The amendments to the ACL introduce strict liability offences for contraventions of the new provisions. The maximum penalty for contravention of these offences is $30,000 for corporations and $6,000 for individuals. In addition, the ACCC can also impose infringement notices of up to $11,500 for corporations and $2,420 for individuals.

Exceptions to the new laws

On 26 March 2019 the Federal Government published Regulations setting out specific exemptions to the new federal laws.

The Regulations specify that the following are not gift cards:

• articles that can have their value increased after supply of a good or service (other than because of a reversal of a payment); and
• articles that are only redeemable in relation to electricity, gas or a telecommunications service. However, this exemption does not cover cards that can be redeemed for music streaming or video game services.

Further, the following gift cards are exempt from all three requirements under the new laws:

• pre-owned gift cards that are on-sold as second-hand goods if the seller is unable to vary the expiry date of the gift card;
• gift cards supplied to certain charities and not-for-profit organisations; and
• gift cards supplied to federal, state or territory or local governments or government bodies, agencies or authorities (except where the government body is primarily commercial in nature).

The following types of gift cards are exempt from the three-year Validity Requirement, but still need to adhere to the Display Requirement and Post-Supply Fee Prohibition:

• gift cards for a particular good or service only available for a limited period of time (eg a one-night concert or temporary exhibition);
• gift cards for a particular good or service supplied at a genuine discount on the market value (eg a voucher for a massage valued at $100 for a price of $65);
• gift cards issued for temporary marketing promotions, where the gift card is supplied in connection with the purchase of goods or services (eg a $100 gift card if the consumer purchases a whitegood within the next month);
• gift cards donated for a promotional purpose (eg a free gift card to celebrate the first birthday of a store, regardless of whether the customer has made a purchase);
• gift cards supplied for the purposes of an employee reward scheme;
• gift cards supplied for the purposes of a customer loyalty program; and
• gift cards supplied in exchange for another gift card if both gift cards cease to be redeemable at the same time.

State laws currently still in place

Laws are currently in place in both New South Wales and South Australia prescribing that gift cards sold to consumers in those jurisdictions must be valid for at least three years. The state laws came into effect in New South Wales on 18 October 2017² and in South Australia on 10 December 2018.³

Three-year minimum validity

The laws in New South Wales and South Australia are similar in substance. Both provide that:

• a person must not sell to a consumer in New South Wales/South Australia a gift card with an expiry date that is earlier than three years after the date of sale;
• a person who sells a gift card to a consumer in New South Wales/South Australia, or who has agreed with the seller to redeem that gift card, must not impose any administrative fee that reduces the redeemable value of the gift card; and
• any term that purports to reduce the validity of a gift card to less than three years from the date of sale is deemed void and the expiry date is taken to be three years from the date of sale.

Exemptions under the state laws

The laws in New South Wales and South Australia both provide that the three-year minimum validity period does not apply to:

• ATM cards, charge cards, credit cards or debit cards;
• reloadable prepaid cards;
• cards or vouchers only redeemable for phone credit, internet access or any other utility;
• cards or vouchers supplied in substitution for goods returned to the supplier of the goods;
• cards or vouchers supplied as part of customer loyalty or employee rewards programs;
• cards or vouchers supplied as part of a temporary marketing promotion to the purchaser of goods or services in connection with the purchase of the goods or services;
• cards or vouchers that are only redeemable for a particular good or service available for a limited period; and
• cards or vouchers redeemable only for a particular good or service and sold at a discount for that good or service.

In New South Wales, cards or vouchers sold for use in a fundraising appeal are also not required to be valid for at least three years.⁴

Penalties

The maximum penalty for contravention of the New South Wales law is $5,500 (50 penalty units), whereas in South Australia it is $5,000.

Quick Guide – Comparisons between laws

What's next

If you'd like to discuss what these laws mean for you, please get in touch with any of the CCR team members below.