Referral Programme Terms In New Zealand

Do you really need written terms for a simple refer-a-friend offer? Yes, you usually do - especially if your startup is offering credits, cash, discounts or prizes to customers who bring in new business.

The good news is that referral programme terms don't need to be complicated. They just need to clearly explain who can take part, what counts as a valid referral, when rewards are paid, and what happens if someone tries to game the system.

Getting this right early helps you run a cleaner campaign, avoid awkward customer complaints, and protect your margins while your referral programme grows.

Do You Need Written Referral Programme Terms?

Yes, you should have written referral programme terms if you're offering any reward for referrals. Even a small discount can create expectations, and unclear expectations are where problems usually start.

Your referral terms sit alongside your usual customer contracts, privacy policy and marketing rules. They explain the referral programme terms you're offering customers when they refer someone to your business.

For example, your customer might think they'll receive a $50 credit as soon as they send a link to a friend. You might mean they'll only receive it after that friend signs up, pays their first invoice and doesn't cancel within 30 days. Both assumptions are understandable, but only one may be commercially workable for you.

Written terms help you avoid disputes by setting out:

• Who can participate: for example, New Zealand residents aged 18 or over, existing customers only, or customers with an active account.
• What counts as a valid referral: for example, a new customer who signs up using a unique referral link and makes a qualifying purchase.
• When the reward is earned: for example, after payment clears and any refund or cancellation period has passed.
• What the reward is: for example, account credit, a discount code, a gift card, free subscription time or cash.
• What conduct isn't allowed: for example, self-referrals, fake accounts, spam, bots or paid advertising using your brand name.

The Fair Trading Act 1986 is also relevant. Your referral claims must not be misleading or deceptive. If your ad says Give $20, Get $20, the conditions attached to that $20 need to be easy to find and easy to understand.

What Should Your Referral Terms Cover?

Your referral terms should cover the mechanics, limits and customer promises of the programme in plain language. A vague one-page template often misses the points that matter most for your business model.

Here is a practical outline you can use as a starting point. It isn't a finished legal document, and a lawyer should tailor it before you use it with customers.

Referral Terms Outline

1. Programme Overview: explain what the referral programme is, the basic terms of use, and how customers can participate.
2. Eligibility: state who can refer, who can be referred, age or location limits, and whether staff, contractors, affiliates or related parties are excluded.
3. How To Refer: describe the referral link, code, form or other process customers must use.
4. Valid Referral Criteria: set out what the referred customer must do, such as creating an account, making a minimum purchase or staying subscribed for a set period.
5. Rewards: describe the reward, its value, whether it's transferable, and whether it can be exchanged for cash.
6. Reward Timing: explain when the reward is issued and what happens if there's a refund, cancellation, chargeback or failed payment.
7. Caps And Limits: include any maximum rewards per customer, campaign budget, expiry dates or geographic limits.
8. Fraud And Misuse: list prohibited conduct and your process for withholding, cancelling or reversing rewards.
9. Privacy: explain what personal information is collected and how it will be handled.
10. Changes Or Ending The Programme: explain how you'll notify customers if the programme changes or closes.

Try to avoid broad clauses that say you can do anything at any time for any reason. Under the Fair Trading Act, unfair contract terms can be a problem in standard form consumer contracts and small trade contracts. You can protect your business, but your terms should still be fair, specific and transparent.

What Fair Trading Act Rules Apply To Referral Selling?

Referral rewards can be lawful, but you need to be careful about how the offer is used in your sales process. In New Zealand, section 20 of the Fair Trading Act 1986 restricts referral selling.

In simple terms, you shouldn't induce a consumer to acquire goods or services by representing that, after the contract is made, they'll receive a rebate, commission or other benefit for giving you prospective customer names, or otherwise helping you supply goods or services to others, if that benefit depends on a later event.

For example, it can be risky to tell a prospective customer: Sign up today and you'll get $200 back if two of your friends sign up later. That kind of promise may be treated differently from a genuine customer referral or loyalty offer that's clearly disclosed and not used to pressure the person into buying.

A safer structure is usually to make the programme separate from the decision to buy, explain all conditions upfront, and only reward genuine referrals once your stated criteria are met. Avoid making the reward a key reason someone enters the original contract, especially if the reward depends on future sign-ups, purchases or approvals.

You should also watch out for pyramid selling risk. If the programme is mainly about recruiting more participants, rather than genuine sales of your products or services to real customers, it may raise serious Fair Trading Act issues. If rewards are being used as part of your sales pitch, or if the programme has several layers of recruitment, get tailored advice before launch.

Can You Offer Cash, Credits Or Discounts As Referral Rewards?

Yes, you can often offer cash, credits or discounts, provided the programme is structured carefully and doesn't amount to prohibited referral selling. Each option also has different commercial, tax and customer experience issues. The right reward depends on your margins, your sales cycle and how easy it's to reverse the reward if the referral doesn't stick.

Account credits are popular for SaaS, subscriptions and online stores because the reward encourages customers to keep buying from you. Your terms should say whether the credit expires, whether it can be used with other offers, and whether it can be refunded for cash.

Discount codes can work well for eCommerce, but you need clear rules around minimum spend, expiry dates, excluded products and whether the code applies before or after GST.

Cash rewards can feel more attractive, but they usually need tighter controls. You may need identity checks, payment details, fraud screening and a process for dealing with overpayments.

There are also tax and GST touchpoints to think through. For example:

• If you give a customer a discount on a taxable supply, your GST treatment may depend on how the discount or credit is structured and applied.
• If you pay cash to a GST-registered business customer for referrals, they may need to account for GST on a taxable supply of referral services.
• If the referrer is regularly promoting your business for reward, the arrangement may start to look more like a referral agreement, affiliate arrangement or contractor relationship than a casual customer referral.
• If you provide gift cards or vouchers, special GST timing rules may apply depending on the type of voucher.

Say Ava runs a Wellington SaaS startup and offers existing customers a $50 account credit for each successful referral. Her terms say the referred customer must pay their first $200 monthly invoice and stay active for 30 days. If her terms also cap rewards at $500 per referrer per month and exclude refunded accounts, she has a much better handle on cost and abuse.

Your accountant should confirm the tax and GST treatment before launch, especially if you're paying cash or working with business referrers.

When Does A Referral Programme Become A Promotion?

A referral programme can become a promotion when chance, prizes or competition-style mechanics are added. A guaranteed reward for a valid referral is usually simpler than an entry into a draw, though you still need clear terms of sale if purchases trigger rewards.

For example, Give a friend $20 and get $20 when they make their first purchase is generally a straightforward referral offer. Refer a friend to go in the draw to win an iPhone is different because a prize draw is involved.

In New Zealand, the Gambling Act 2003 can apply to prize promotions where winners are chosen by chance. Some trade promotions are allowed as sales promotion schemes, but you need to structure them carefully. You should think about:

• whether entry requires a purchase or other payment;
• whether the promotion is mainly to promote your goods or services;
• how winners are selected;
• what the prizes are and their value;
• whether any licence, permit or specific process is needed; and
• whether your advertising clearly states the key conditions.

The Fair Trading Act also matters here. If you advertise a promotion, customers need to understand the real offer. If there's a limited number of rewards, a tight closing date, a minimum spend or a cap per customer, don't hide that in fine print.

If you're combining referrals with a prize draw, chance-based winner selection or influencer campaign, get tailored advice before you launch. Small wording changes can make a big difference to how the promotion is regulated.

How Do Privacy And Marketing Laws Apply?

Privacy and marketing laws apply as soon as you collect or use personal information for the referral programme. That might include a referrer's name, customer ID, email address, referral link activity, the referred friend's name or their contact details.

The Privacy Act 2020 requires you to collect personal information for a lawful purpose connected with your business, collect only what you need, and be transparent about how you'll use and store it. Your privacy policy should match what your referral programme actually does.

If your referral flow asks customers to enter a friend's email address, be careful. The friend may not have agreed to receive marketing from you. A safer option is often to give the referrer a unique link they can share themselves through their own message.

If your business sends commercial electronic messages, the Unsolicited Electronic Messages Act 2007 may apply. In broad terms, commercial emails and texts need consent, accurate sender identification and a working unsubscribe facility. You also shouldn't add referred people to your newsletter or marketing list unless they have clearly opted in.

Your terms and privacy wording should explain:

• what information you collect from referrers and referred customers;
• why you collect it, such as tracking referrals and issuing rewards;
• whether you use cookies, referral links or analytics tools;
• who you share information with, such as payment processors, CRM tools or email platforms;
• how long you keep referral data; and
• how people can contact you about privacy requests or complaints.

If your referral programme involves overseas software providers, check whether personal information is being stored or accessed offshore. Under the Privacy Act 2020, overseas disclosures need extra care, and your privacy policy shouldn't overpromise if data is actually handled outside New Zealand.

How Do You Reduce Fake Referrals And Abuse?

You reduce abuse by designing the programme so rewards are only issued after real value is created, then backing that design with clear terms. Referral fraud is much easier to prevent than unwind after rewards have already been paid.

Common abuse patterns include:

• customers referring themselves using a second email address;
• multiple accounts from the same household, device, IP address or payment method;
• fake sign-ups that cancel before paying;
• referrers posting codes on coupon websites when the programme is meant for genuine friends;
• spam messages sent to large contact lists; and
• paid search ads using your trade mark or business name to capture referral rewards.

Your terms can help by saying you may verify referrals before issuing rewards, withhold rewards linked to suspicious conduct, and cancel rewards issued in error. Keep that wording specific. For example, refer to duplicate accounts, self-referrals, chargebacks, refunds, automated sign-ups and unauthorised advertising.

You can also use practical controls, such as:

• requiring the referred customer to be new to your business;
• setting a minimum purchase value;
• waiting until the refund or cancellation window has passed;
• capping rewards per customer, per month or per campaign;
• using unique referral links instead of generic codes;
• excluding referrals made through spam, bots or paid ads; and
• keeping records of referral activity, reward approvals and customer communications.

Don't forget the customer experience. If you reject a reward, explain the reason in a calm, factual way and point to the relevant clause. A clear paper trail can save you a lot of time if a customer complains to your support team or publicly on social media.

Key Takeaways

• Written referral programme terms help you explain eligibility, rewards, timing, limits and fraud rules before customers start referring.
• Referral rewards can be lawful, but avoid structures that amount to prohibited referral selling under the Fair Trading Act 1986.
• Cash, credits, discounts and vouchers can each raise different tax and GST issues, so check the structure before launch.
• If your referral offer includes a prize draw or chance-based winner selection, it may need promotion-specific terms under New Zealand rules.
• The Privacy Act 2020 and Unsolicited Electronic Messages Act 2007 matter if you collect friend details, send referral emails or use tracking tools.
• Fraud controls work best when your terms are specific, fair and matched to how your programme actually operates.

If you'd like help with your referral programme terms, Fair Trading Act rules, privacy wording or promotion rules, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.