ATO warns business owner over loyalty points from cards

[daft009]

something like this will potentially hurt small business.

For example: I'm using the points earnt via my small business to travel for work. Yes I can go economy to Europe for work which means I will need to take a few days off upon my return to recover from jetlag and also go a little earlier. so potentially a week of work missed.

Also thats a ~$2k ticket in economy in one hit for the business (IE could be bad for cashflow)

OR I travel business class with my points, go for a shorter time (ready to attend meetings as soon as I land).

Earning equivalent points take a few months of business expenses to earn, therefore spreading the "cost" of the ticket over 4-5 months and improving overall cash flow.

So the way I see it, I am helping my business.

 

[theblank]

something like this will potentially hurt small business.

that doesnt work out.

If rewards points earned are to be consideded taxable income in the hands of the business, then when you redeem them for business trips then the points value would be a deductible expense. So it wouldnt make any difference to your business bottom line.

 

[drron]

that doesnt work out.

If rewards points earned are to be consideded taxable income in the hands of the business, then when you redeem them for business trips then the points value would be a deductible expense. So it wouldnt make any difference to your business bottom line.

But the point made was that the points improved cash flow.Just because you get a deduction later doesn't improve cash flow but it can put pressure on the small business-ie hurt it.

 

[Guvner]

Meanwhile, back at the ATO..

Nocookies | The Australian

Now THAT'S fraud.

 

[nutwood]

Meanwhile, back at the ATO..

Nocookies | The Australian

Now THAT'S fraud.

Unfortunately they obviously didn't earn over 250,000 worth of points in a single year or they'd have been caught much sooner!

 

[daft009]

Meanwhile, back at the ATO..

Nocookies | The Australian

Now THAT'S fraud.

picking on the little guys while trying to cut a deal for your son under the table... looks oh so nice.... pathetic!

 

[nutwood]

Meanwhile, back at the ATO..

Nocookies | The Australian

Now THAT'S fraud.

Actually when you think about it, that's the reason they purchased private planes; to ensure their personal flights didn't trigger any flags.
On a serious note, it's interesting that a senior Commonwealth official caught up in a conspiracy that extracted $165m from the tax payer faces a potential five years in gaol. Now gaol's not a lot of fun, but at $33m pa, I reckon there'd be more than a few people sending in their CV's!

 

[Deleted member 29185]

A few have suggested the points (reward) FBT may be the thin edge of the wedge and what about airline lounge access. I could salary sacrifice airline club membership, so I think that may indicate their thinking on that one!

I also had a client once that said he wouldn't pay my time involved with airline travel because "you get the points". Err, the points aren't worth that much buddy. He also believed we should fly zoo in order to "break into" foreign markets. I later found out he had some lucrative tax breaks from Austrade where he and his company had to meet a minimum number of flights each year to qualify. Even the "holier than thou" of the tax argument usually maximise every legit opportunity open to them.

 

[trippin_the_rift]

One could put the business transactions on a fee-free debit card, which earn zero points.

Therefore, the only financial differentiation between debit and credit card is the annual fee. I would argue that by paying the annual fee personally (and not claiming reimbursement or deduction), then any benefits which transpire are 100% yours to do as you please with zero tax implications.

 

[Chicken]

We here operate on a Common law system, that is a bunch of statutes mixed into a bucket of spaghetti. If it's not written down, it's free for all. Actually, it's nearly free if there isn't a test case. No not really but you get my drift.

A ruling is to give someone certainty, like a blessing, but it's not bulletproof either way.

The talk of 'position' of ATO hence can be argued as meaningless.

The rule says you need to do tax return every year. When was the last time you hear the ATO sending some brick layer on PAYG income of $70000 to prison because he didn't file tax return? Never, it's a pointless exercise.

So, is the ATO going to come after you for a F seat MEL - LAX? Very unlikely.

Don't get me wrong, I would love the ATO to go after someone on a free flight. Imagine a QC trying to explain to a high court judge on how to convert points from a card to a frequent flyer program, how to minus sign up bones, how to buy a pallet of cat food to earn points, then fuel charge, on fare bucket, or even how do you get a seat (availability) off Qantas to start with? It would make Judge Judy look boring!

 

[Solid]

The rule says you need to do tax return every year. When was the last time you hear the ATO sending some brick layer on PAYG income of $70000 to prison because he didn't file tax return? Never, it's a pointless exercise.

Although I agree with other parts of your post it actually happens reasonably regularly and the ATO release statistics about it.

https://www.ato.gov.au/general/the-...ws-and-results/tax-crime-prosecution-results/

 

[cove]

With our loyalty programme we keep to the airline imposed rule of limiting the issuing of points to 250,000 per person per year.
I think the airline had received a ruling from the ATO on this more than a decade ago. We checked about 5 years ago and nothing had changed.

 

[Chicken]

Although I agree with other parts of your post it actually happens reasonably regularly and the ATO release statistics about it.

https://www.ato.gov.au/general/the-...ws-and-results/tax-crime-prosecution-results/

They do go after people, but they go after people who are worth it. Examples:

2 years ago targeting taxi drivers. That's an exercise due to easy to avoid tax / cash economy, and it was an exercise of killing one as an example to warn the others.

Also if you are reporting yourself as a carpenter, but reporting something stupid like $40000 pa, then you are clearly trying to pull one.

If you are straight $70 or $80 k with PAYG deduction every week to the ATO, then it is very likely that you are legit, and they are not going to bother you. For what it is worth, the effort to chase you may actually make you start claiming deductions (high vis, steel boots, hair clips, gloves, hot water bottle, paracetamol, etc etc)

But yeah, I look forward to a show which must be 10 x better than Judge Judy!

 

[JohnK]

something like this will potentially hurt small business.

For example: I'm using the points earnt via my small business to travel for work.

....

So the way I see it, I am helping my business.

I think you'll be ok.

 

[melaus]

Is "Judge Judy" still on-air?

 

[Deleted member 29185]

Is "Judge Judy" still on-air?

Does anyone actually care??

 

[daft009]

I think you'll be ok.

thanks good to know

 

[Chicken]

Is "Judge Judy" still on-air?

Yep, still on!

Does anyone actually care??

The cases are real! LOL

 

[sumthinfornuthin]

Come on they wouldn't even have to do that. They are using these cards to pay the ATO - the ATO already has the information on file, a good data geek would be able to run this report on their morning tea break.

Now that would be a little rude !!

Pay tax with the credit card SO THEY GET PAID...then claw back FBT taxes on the miserly points now on offer...surely they wouldn't be that mean ?? would they ????

 

[Kangol]

One factor that has not been mentioned, if this ever were to escalate, is the distinction between points earned personally vs those earned via a business.
How would they determine that?
Points have no value if not exchanged through the limited method of redemption (the FF provider).
Money does have value if not exchanged - the money vs points argument does not hold weight.

If a certain proportion of one's points were redeemed for a plane ticket, which pool (personal or business) does that come out of?

There is also often an annual fee to get a points earning credit card (the cost to obtain points), so if that is not claimed as a business expense (as others have mentioned), like that of a personal card, then how can the benefit of a personal expense be deemed "business income"?