ATO (tax office) payments by credit card

[KLN]

thanks for that.
the funny part is that i'm the one that told my accountant about how to do it too.
it always seems to be at that time that my CC needs to be paid off in full anyway, and it is always nice to see it at $0.00 for a day or two. i do have two personal ones and the Bas every quarter anyway.

 

[Deleted User]

I'm a Sole trader here and my accountant informed me as follows: -

• All ATO portal payment fees charged are 100% deductible.
• He did not seem all that fussed about me paying my income tax bill with a credit card and also claiming the dedutction on the ATO card payment fee, since I am technically forced to pay this way since I am not an employee of a company who can have tax withheld by the employer.

My point of view is that as long as you are paying the taxes you need to, why would the ATO fuss about the claiming of the card fee deduction. After all, the card fee deduction is relative, thus the bigger the deduction you can claim, the more the ATO get from you in PAYG, GST etc...

As per normal for the ATO, too many rules and misleading information on their website

 

[Stephen65]

For those considering putting a card into credit before making a payment just beware that the card rules frequently deny points for credit transactions. Whether or not this will be enforced however is another question. My CBA card rules say no points for business transactions but I have never had this enforced against me.

The potted summary the ATO provides at:

Credit card payment fee deductibility guidelines

is not a very good guide to deductibility because it fails to address the different rules that apply to different classes of taxpayers. Companies and the self-employed have always had access to a wider range of deductions than the employed because the former are carrying on a business and the ATO takes a wider view of the costs of carrying on a business than the costs of earning a salary.

 

[Deleted User]

For those considering putting a card into credit before making a payment just beware that the card rules frequently deny points for credit transactions. Whether or not this will be enforced however is another question. My CBA card rules say no points for business transactions but I have never had this enforced against me.

The potted summary the ATO provides at:

Credit card payment fee deductibility guidelines

is not a very good guide to deductibility because it fails to address the different rules that apply to different classes of taxpayers. Companies and the self-employed have always had access to a wider range of deductions than the employed because the former are carrying on a business and the ATO takes a wider view of the costs of carrying on a business than the costs of earning a salary.

I don't care since I deduct the card fee anyway, but what is the point of this condition....

you incurred it as a result of paying an income tax liability and you did not borrow money from your card provider to make the payment

Why does it really matter if you borrow money...? You still pay it back....?

Also if you pay interest on the credit card account for the funds to pay off your tax debts, Surely as a sole trader or business this would be a tax deduction anyway...?

Why is our tax system so complicated and so hard to understand...?

 

[Stephen65]

Thanks Stephen. I did try to search using "Pty Ltd" but came up with nothing. It is a pain when someone 'discovers' an old thread and asks the "same old same old" so I appreciate your politeness in giving me the 'non definitive" answer from the ATO.

And yes, the logic about the Interest being Tax deductible for Companies is true, but we ain't talking logic here!

It's an old tax question: if I borrow to pay a tax bill do I get a deduction for the interest on the loan? The ATO view has always been (since about 1930 at least) that the interest is deductible for companies and self-employed because paying tax is a cost of running a business and the interest incurred to borrow to pay a business cost is deductible, see:

ATO ID 2006/269 - Deductions and Expenses: interest incurred on moneys borrowed by a sole trader to pay income tax

However the ATO does not allow deductions for employees in the same circumstance. The ATO view is that tax employees pay is a deduction from their income after the income earning process has finished. Since its not a cost of earning income interest on borrowings to pay it is not deductible.

I discussed this back in post 204 in this thread and explained why I think by analogy the credit card fee should be deductible to companies and the self-employed, namely, the CC fee is a cost of paying your tax in the same way incurring interest on a borrowing to pay your tax is.

The best advice is to ask your accountant. That way even if the ATO changes its mind about this you will have the protection of having sought advice.

 

[Deleted User]

"paying tax is a cost of running a business"

Therefore all credit card surcharges by the ATO portal must surely be deductible

Edit: "if running a business or a sole trader conducting business under an ABN"

 

[Stephen65]

shintaro

why the ATO summary says:

you incurred it as a result of paying an income tax liability and you did not borrow money from your card provider to make the payment

is because section 25-5 which gives you a deduction for the cost of managing your tax affairs specifically excludes borrowing costs.

Implicit in this summary is the ATO view that wage and salary earners can't claim a deduction under the other two sections that might otherwise allow a deduction: sections s8-1 and s25-25.

Re your last post - I agree that CC fees should be deductible to companies and the self-employed even if not deductible to employees.

 

[rechoboam]

It's an old tax question: if I borrow to pay a tax bill do I get a deduction for the interest on the loan? The ATO view has always been (since about 1930 at least) that the interest is deductible for companies and self-employed because paying tax is a cost of running a business and the interest incurred to borrow to pay a business cost is deductible, see:

ATO ID 2006/269 - Deductions and Expenses: interest incurred on moneys borrowed by a sole trader to pay income tax

However the ATO does not allow deductions for employees in the same circumstance. The ATO view is that tax employees pay is a deduction from their income after the income earning process has finished. Since its not a cost of earning income interest on borrowings to pay it is not deductible.

I discussed this back in post 204 in this thread and explained why I think by analogy the credit card fee should be deductible to companies and the self-employed, namely, the CC fee is a cost of paying your tax in the same way incurring interest on a borrowing to pay your tax is.

The best advice is to ask your accountant. That way even if the ATO changes its mind about this you will have the protection of having sought advice.

I may well be wrong but if the advice is incorrect you have no protection. Now obtaining a private ruling from the ATO in writing would be a different matter.

 

[Deleted User]

shintaro

why the ATO summary says:

you incurred it as a result of paying an income tax liability and you did not borrow money from your card provider to make the payment is because section 25-5 which gives you a deduction for the cost of managing your tax affairs specifically excludes borrowing costs. Implicit in this summary is the ATO view that wage and salary earners can't claim a deduction under the other two sections that might otherwise allow a deduction: sections s8-1 and s25-25.

Thanks Stephen, seems like you know your tax stuff

It is still terribly confusing, but I deduct anyway. Perhaps I am breaking the tax laws...?

• I Pay any outstanding personal tax bill via the ATO CC Portal and claim the deduction
• I pay my PAYG & GST installments via the ATO CC Portal and claim the deduction.
• In using a CC for Payment I use the funds of my credit provided until they send me the bill (I borrow funds for payments to ATO)
• I conduct a business as a sole trader under my ABN

Am I claiming deductions where I am not allowed...? Am I breaking the law...?

I believe I am in the clear because of the following statements: -

I incurred it as a result of paying a goods and services tax, fringe benefits tax, luxury car tax or wine equalisation tax liability, and that liability arose in the course of gaining or producing your assessable income, or in the course of carrying on your business for the purposes of gaining or producing assessable income

I incurred it as a result of making PAYG withholding payments where you can claim a deduction for the wages and salaries that gave rise to the withholding obligation

Perhaps I am wrong though...?

 

[Stephen65]

@rechoboam

A private ruling will give you absolute protection (i.e. once the ATO gives you a ruling then they are bound by it in all respects) but even without a ruling if you provide your accountant with all the relevant facts and information and act on their advice you are at least safe from penalty tax under the new safe harbour rules (but not safe from having the deduction disallowed):

False or misleading statement penalty - no liability (safe harbour) fact sheet

@shintaro

I can't give you advice about your individual tax position without crossing the line and becoming your advisor. However, if its any comfort I am in exactly the same situation as you've outlined in your four dot points and I intend to claim the CC fees as deductions when my 10-11 return is due.

 

[cove]

I feel you can get the full pleasure of earning those points with a phone call to my gal at the ATO rather than that Internet click for a credit card payment. She is available 24/7 and has a seductive or is it a re-assuring voice as she takes your tax money....her number is 1300 898 089 and this method would only get painful if you had a million or more to pay which would take more than 4 phone calls.
Pleasure and tax payments....now that is pretty weird!
We cannot give tax or financial advice but the deductibility could be the icing on your cake.
Now that you have gone this far it merely becomes a selection of the card or cards to use based on where you wish to fly in J or First. If you love flying discount economy this thread is way less valuable than say a J ticket to the US or Europe.
Pleasure in October......Yes!

 

[Pushka]

@rechoboam

A private ruling will give you absolute protection (i.e. once the ATO gives you a ruling then they are bound by it in all respects) but even without a ruling if you provide your accountant with all the relevant facts and information and act on their advice you are at least safe from penalty tax under the new safe harbour rules (but not safe from having the deduction disallowed):

False or misleading statement penalty - no liability (safe harbour) fact sheet

.

That is interesting to know. I didn't realise the Tax Office protected you (from fines etc) if you had taken the advice of your accountant and they were wrong.

 

[Stephen65]

Safe harbour is a new development and only took effect from March of last year. If you comply with the requirements it gives you protection from having penalty tax assessed against you at the 25% level if your agent didn't take reasonable care in putting in your return.

It doesn't protect you against the higher level penalties for either recklessness (50%) or intentional disregard (75%).

 

[drcrox]

Hello all,

As a newbie, I wanted to get confirmation that I can pay my quarterly BAS payment by credit card - despite the "methods of payment" on the BAS including every conceivable method of payment other than credit card.
With a new platinum AMEX charge card, I am keen to reap the rewards points!

I have checked the ATO cc portal, and cannot see anything on their website that suggests I have to continue BPay payments from my bank.

Cheers,
Matt

 

[serfty]

How old is this thread?

That's about how long I have been paying my BAS and other TAX payments via CC.

 

[drcrox]

April 2nd, 2009!
Thanks for that.

As I have had less than pleasant dealings with the ATO over the last 12 months, resulting in me lodging a complaint with the taxation ombudsman about their ineptitude, I want to make sure all is OK before choosing the payment option they don't advertise.

Matt

 

[cove]

Well Matt that would pretty much get you a bravery award with your tax complaint.
Despite the stationery saying you cannot pay a bill to the Australian Taxation Office by a credit card you can pay every one of the fiscal fiends accounts on your trusted credit cards.
Just make sure you have the credit limits in place or know how to re-load the cards to pay by the due date.
It sounds like you may enjoy making these points!

 

[drcrox]

Thanks Cove,

Yes I will be typing the numbers into the portal with an ever increasing smile!
Will also be discussing the deductability of the surcharge with my accountant....

 

[Duffa]

Hello all,

With a new platinum AMEX charge card, I am keen to reap the rewards points!


Cheers,
Matt

That's the new platinum Amex CHARGE card, not credit card, with no preset spending limit right?
Hmmm, I have one of those cards too and after I paid a BAS of $25k with the charge card I got a phone call from Amex saying I had exceeded their "comfort limit".
I replied that I was very comfortable thank-you, with my ability to repay that amount at the end if the month but they said they weren't. It seems a "comfort limit" is their euphemism for "your card is suspended, until you pay it off!" I have only been with them for 3 months and don't have a repayment history
The alternative of loading the card with cash is pretty useless as the points become rather expensive at 1.25%. Far better to have your cash in uBank or Rabobank for 46 days at 6.01% p.a.

p.s. the ATO website can take you to the credit card payment portal

https://www.optussmartpay.com/governmenteasypay-ato/

 

[Duffa]

• I Pay any outstanding personal tax bill via the ATO CC Portal and claim the deduction
• I pay my PAYG & GST installments via the ATO CC Portal and claim the deduction.
• In using a CC for Payment I use the funds of my credit provided until they send me the bill (I borrow funds for payments to ATO)
• I conduct a business as a sole trader under my ABN

Perhaps I am wrong though...?

I do exactly as you do except for dot point 1.
My accountant told me that even though I'm self employed, I am paying my personal tax with a credit card (borrowed money) and therefore cannot deduct.
My staff PAYG, GST etc, which are costs of running a business are deductible and therefore, so is the ATO credit card fee.