ATO (tax office) payments by credit card

[cj0325]

FFPs and loyalty programs specifically state in their T&Cs that their points have $0 value so no tangible (tax accountable) benefit is gained.

That's a pretty long bow you're firing with there. ATO is definitely going to crack down on it, just a matter of time. Based on this article the horse may very well have bolted:

Deloitte | FBT, fringe benefits tax, flight rewards, frequent flyer programs

 

[wafliron]

In short, no.

If you really want to get into it, read ATO/Payne: PS LA 2004/4 (GA) - Income tax and fringe benefits tax - rewards received under consumer loyalty ... (As at 14 July 2004)

Makes for riveting bedtime reading.

I think you might want to read that ruling again (unfortunately)...

Also, good luck putting a finite dollar value on a frequent flyer point. For tax purposes mine would be worth $0.000000000000001 each as for value, well...

As I said in the post I was writing at the same time as you were writing yours, I'm pretty sure during earlier discussions someone found a ruling (or similar) indicating in cases where FBT applied the FBT-able value was based on the commercial value of the goods the points are redeemed for, not a simple deemed value of each point. I could be remembering incorrectly - but the ATO link you posted does seem to suggestion this is the case in the examples given.

 

[ComeFlyWithMe]

That's a pretty long bow you're firing with there. ATO is definitely going to crack down on it, just a matter of time. Based on this article the horse may very well have bolted:

Deloitte | FBT, fringe benefits tax, flight rewards, frequent flyer programs

The compliance costs to implement FBT on FFPs would likely far exceed any gain to be had to the ATO IMO, and how would you value the redemptions when the conditions and benefits are not the same as a cash fare?

 

[cj0325]

Considering every single loyalty program has the option to convert points into a cash equivalent - whether it be AMEX member rewards being converted to "cash back" or converting points to retail gift cards - it wouldn't be at all difficult for the ATO to place a "value" on points. Big Brother is definitely watching - the ATO could readily generate reports identifying which of us are pumping through millions of dollars worth of taxes on credit cards and then selectively audit us. Implementation costs would be negligible - they'd be trawling through data that they already have!

 

[ComeFlyWithMe]

Considering every single loyalty program has the option to convert points into a cash equivalent - whether it be AMEX member rewards being converted to "cash back" or converting points to retail gift cards - it wouldn't be at all difficult for the ATO to place a "value" on points. And compliance costs - you've got to me kidding me. Big Brother is definitely watching. You don't think the ATO could generate reports identifying which of us are pumping through millions of dollars worth of taxes on credit cards and then selectively target a sample population?

Then I guess the answer is not to pump through 'millions of dollars worth of taxes' on your card! In addition, many company shareholders pay tax on dividends, so technically they are paying personal income tax, hence a personal card can be used.

There is a specific ruling on business tax expenses on credit card which relate to the claiming of the fees, whether or not the bank 'loaned' the money to the taxpayer etc. Can't remember this one. Brains trust?

Plenty of grey area, but if someone personally pays the annual fee in order to opt in to a loyalty programme and used a card for personal expenditure also, the case states that is not subject to FBT.

A business owner is more than welcome to report themselves for further investigation and let us know the outcome

IMO, it's best to stay well under any radars...

 

[cj0325]

Then I guess the answer is not to pump through 'millions of dollars worth of taxes' on your card!

Or at minimum using a range of cards to spread the spend across... A common theme on this thread, and perhaps one more reason why it's a good idea!

In my case I can't rely on the annual fee offsetting any benefit... was lucky enough to get three different citi "no annual fee for life" cards when they were running the promotion. Two of which have since had complimentary upgrades to Signature and one to Platinum.

 

[Deleted User]

My two cents worth...

1. If I use my points for flights for business use then its a pointless exercise on their behalf because its not a capital gain for personal taxation.

2. Are the points inclusive or exclusive of gst, if inclusive then the gst component I will claim back.

3. If fbt applies as per item #1 it would be deductible if used for business anyway, I may disagree with their valuation in this case to obtain a larger deduction

 

[ComeFlyWithMe]

Or at minimum using a range of cards to spread the spend across... A common theme on this thread, and perhaps one more reason why it's a good idea!

In my case I can't rely on the annual fee offsetting any benefit... was lucky enough to get three different citi "no annual fee for life" cards when they were running the promotion. Two of which have since had complimentary upgrades to Signature and one to Platinum.

A good idea to spread for sure.

Regardless of annual fee or not, you personally entered into a credit contract with the card provider.

 

[Korda]

Folks,

I am considering undertaking a major point acquisition exercise as it looks like my employer's company will have a seven figure amount of GST that has to be paid within a single calendar month (followed by nothing for a very long time). There's no way I can capture all of this, but I would like to give it a good try.

I am only really interested in acquiring points with a Visa or Mastercard (and at a rate of 0.42 cents per real point or less), as for me it is not worth paying more.

I have read most of this ATO thread, and from what I can tell, the following Visa/Mastercard cards appear to generate real frequent flyer points at 0.42 cents per point or less:
Woolworths Qantas Mastercard (Limited to around 50,000 points per month)
Bankwest Qantas Platinum Mastercard (200,000 annual point cap)
Macquarie Platinum Visa card (200,000 annual points cap)
HSBC Platinum Qantas Visa Card (300,000 annual points cap)

As I only have the Woolworths card I will have to apply for the other three cards.

I have a couple of questions on this:

1) Does anybody have first hand experience on whether Macquarie and HSBC are currently paying on ATO transactions?
2) Does anybody know any other cards I could add to the coughnal (those caps are rather limiting)?
3) Does anybody know how many credit cards you can apply for in a month before your credit rating deteriorates substantially?

Thanks!

 

[ComeFlyWithMe]

My two cents worth...

1. If I use my points for flights for business use then its a pointless exercise on their behalf because its not a capital gain for personal taxation.

2. Are the points inclusive or exclusive of gst, if inclusive then the gst component I will claim back.

3. If fbt applies as per item #1 it would be deductible if used for business anyway, I may disagree with their valuation in this case to obtain a larger deduction

1. It would be assessable income, not capital gain but yes you are right. The pseudo expense would offset the pseudo income.

2. Good point. A voucher includes GST and is claimable against flights with GST in the price, therefore an input tax credit could arise... I like your thinking

3. True, as the value would be variable, you'd just use the poorest value on the store to work out your value. Will the providers be reporting on redemptions? If they do, at least we'll know the true value of a frequent flyer point!

 

[ComeFlyWithMe]

Folks,

I am considering undertaking a major point acquisition exercise as it looks like my employer's company will have a seven figure amount of GST that has to be paid within a single calendar month (followed by nothing for a very long time). There's no way I can capture all of this, but I would like to give it a good try.

I am only really interested in acquiring points with a Visa or Mastercard (and at a rate of 0.42 cents per real point or less), as for me it is not worth paying more.

I have read most of this ATO thread, and from what I can tell, the following Visa/Mastercard cards appear to generate real frequent flyer points at 0.42 cents per point or less:
Woolworths Qantas Mastercard (Limited to around 50,000 points per month)
Bankwest Qantas Platinum Mastercard (200,000 annual point cap)
Macquarie Platinum Visa card (200,000 annual points cap)
HSBC Platinum Qantas Visa Card (300,000 annual points cap)

As I only have the Woolworths card I will have to apply for the other three cards.

I have a couple of questions on this:

1) Does anybody have first hand experience on whether Macquarie and HSBC are currently paying on ATO transactions?
2) Does anybody know any other cards I could add to the coughnal (those caps are rather limiting)?
3) Does anybody know how many credit cards you can apply for in a month before your credit rating deteriorates substantially?

Thanks!

I think you are treading on dangerous ground. 7-figure GST payments will raise very large red flags.

 

[burmans]

That's a pretty long bow you're firing with there. ATO is definitely going to crack down on it, just a matter of time. Based on this article the horse may very well have bolted:

Deloitte | FBT, fringe benefits tax, flight rewards, frequent flyer programs

Not sure why you are asking here if you are so convinced of the fact ATO will crack down. The main reason they haven't for the last twenty or so years is not actually because they don't want to, they do, but they got advice that it was unlikely to fly under existing tax law.
Now the people in charge of the ATO may have changed but I don't think the tax law has.
Personally I am relying on the "Where expenses are incurred on behalf of the employer for legitimate business expenses" clause, nothing in that piece of advice filled with lots of qualified statements puts me off.

 

[DaveB]

[FONT=&quot]Provided the individual pays the associated credit cards annual fees, actions taken for the purpose of enabling a business to operate without the need for an overdraft/loan facility will always be a difficult case for the ATO to win.
I wonder whether the ATO wants to go back to the days where business owners claimed travel expenses as business related expenses in lieu of most now probably not bothering and using FF points. Very easy for most professionals to tie in their holidays with some random OS seminar or conference like I did to Denver in the 80's. Heck, even plumbers had a convention a few years back in the Azores. Imagine all the hack ex-pollies giving their two bobs worth on the seminar circuit on how to 'accommodate' the system.
Trying to put a cap on the amount of FF points would just become another reason for business owners to not bother getting any larger. Industrial relations and payroll tax are enough of a burden affecting $5m+ turnover companies without taking away probably the last untaxed benefit of running a business. Valuing frequent flyer points might just be as hard as valuing the risk all business owners take when required to sign business bank overdrafts and creditor guarantees.[/FONT]

 

[Mattyana2003]

Folks,

I am considering undertaking a major point acquisition exercise as it looks like my employer's company will have a seven figure amount of GST that has to be paid within a single calendar month (followed by nothing for a very long time). There's no way I can capture all of this, but I would like to give it a good try.

I am only really interested in acquiring points with a Visa or Mastercard (and at a rate of 0.42 cents per real point or less), as for me it is not worth paying more.

I have read most of this ATO thread, and from what I can tell, the following Visa/Mastercard cards appear to generate real frequent flyer points at 0.42 cents per point or less:
Woolworths Qantas Mastercard (Limited to around 50,000 points per month)
Bankwest Qantas Platinum Mastercard (200,000 annual point cap)
Macquarie Platinum Visa card (200,000 annual points cap)
HSBC Platinum Qantas Visa Card (300,000 annual points cap)

As I only have the Woolworths card I will have to apply for the other three cards.

I have a couple of questions on this:

1) Does anybody have first hand experience on whether Macquarie and HSBC are currently paying on ATO transactions?
2) Does anybody know any other cards I could add to the coughnal (those caps are rather limiting)?
3) Does anybody know how many credit cards you can apply for in a month before your credit rating deteriorates substantially?

Thanks!

If you put $50K through the WW card in a month they will take it off you in a flash. You have to limit it to $10-15k per month MAX. I had my card taken off me for $25K in a month.

 

[Pukka]

Not sure why you are asking here if you are so convinced of the fact ATO will crack down. The main reason they haven't for the last twenty or so years is not actually because they don't want to, they do, but they got advice that it was unlikely to fly under existing tax law.
Now the people in charge of the ATO may have changed but I don't think the tax law has.
Personally I am relying on the "Where expenses are incurred on behalf of the employer for legitimate business expenses" clause, nothing in that piece of advice filled with lots of qualified statements puts me off.

I have to say there are a lot more things the ATO should be "cracking down on" than this. I think most of the people on this thread pay their fair share of tax; how about going after the cash in hand brigade for a change

 

[legroom]

One really positive thing to comment is that you had taken the time out to do some reading first. Well done !

I would be concerned if someone opens a new CC account and then rush through 100% non-retail spending.

It would be likely to raise some alarms somewhere pretty soon - esp. with the WOW EDR CC.

Of the CCs you listed, I had used the WOW EDR and the Macquarie Visa Plat with no difficulty. However, I do try to mix with some retail spending in between.

Please, don't rock the boat too much.

Folks,

I am considering undertaking a major point acquisition exercise as it looks like my employer's company will have a seven figure amount of GST that has to be paid within a single calendar month (followed by nothing for a very long time). There's no way I can capture all of this, but I would like to give it a good try.

I am only really interested in acquiring points with a Visa or Mastercard (and at a rate of 0.42 cents per real point or less), as for me it is not worth paying more.

I have read most of this ATO thread, and from what I can tell, the following Visa/Mastercard cards appear to generate real frequent flyer points at 0.42 cents per point or less:
Woolworths Qantas Mastercard (Limited to around 50,000 points per month)
Bankwest Qantas Platinum Mastercard (200,000 annual point cap)
Macquarie Platinum Visa card (200,000 annual points cap)
HSBC Platinum Qantas Visa Card (300,000 annual points cap)

As I only have the Woolworths card I will have to apply for the other three cards.

I have a couple of questions on this:

1) Does anybody have first hand experience on whether Macquarie and HSBC are currently paying on ATO transactions?
2) Does anybody know any other cards I could add to the coughnal (those caps are rather limiting)?
3) Does anybody know how many credit cards you can apply for in a month before your credit rating deteriorates substantially?

Thanks!

 

[sumthinfornuthin]

One really positive thing to comment is that you had taken the time out to do some reading first. Well done !

I would be concerned if someone opens a new CC account and then rush through 100% non-retail spending.

It would be likely to raise some alarms somewhere pretty soon - esp. with the WOW EDR CC.

Of the CCs you listed, I had used the WOW EDR and the Macquarie Visa Plat with no difficulty. However, I do try to mix with some retail spending in between.

Please, don't rock the boat too much.

i think you need to have plenty of other expenses as well
i have put in excess of $ 25K through mine without query

 

[Deleted User]

another 2 cents from me...that makes 4¢ from me tonight...

If using a personal credit card, please remember that when you applied for the said card you provided them with your current taxable income, hence if you proceed to spend significantly more than this throughout the year, or even worse "more than your declared taxable income" on a month by month basis, you are going to get found out pretty quickly and will be churning through cards which may have a detrimental effect on your credit rating / score

Yes please don't rock the boat too much...

 

[Beta4Me]

Yes please don't rock the boat too much...

Or go for it and get the whole 1M points knowing you'll have trashed all those cards, but no matter as the opportunity isn't coming again for a 'long time'?

 

[ComeFlyWithMe]

Or go for it and get the whole 1M points knowing you'll have trashed all those cards, but no matter as the opportunity isn't coming again for a 'long time'?

Pretty sure it will trigger the bank's AML flags...

AML:Anti Money Laundering for those playing at home...