ATO warns business owner over loyalty points from cards

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In principle, I can't say I mind if the ATO decides that deriving personal non-business benefit out of one's business expenditure ought to be taxed. It seems fair - if Australia were like America where you can get "cashback" credit cards, except if you could divert the cashback to your personal bank account, I'd expect that to be taxed too. The only problem to me is administration and enforcement.
 
Nutcase said:
Well it looks like the party is really over now.

The Tax Office has been reviewing its treatment of loyalty points received via business spending since April 2016, when an industry partnership meeting on fringe benefits tax was informed of the move, according to HLB Mann Judd Sydney tax partner Mariana von Lucken.

http://www.australianfrequentflyer.com.au/community/newthread.php?do=newthread&f=74
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Oh no, the sky is falling, the sky is falling.

But then I read the article....

"While there have been no instances of this to date, business owners should make sure their accountant is on top of such concerns, and can advise them appropriately if things change in the future," she said.







 
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ermen said:
I have not read the article behind the AFR paywall.

But the question of whether reward points should be taxed has already been addressed by the courts in Payne (1996)

PS LA 2004/4 (GA) - Taxing consumer loyalty program rewards (As at 9 July 2015)
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The Tax Office seem to the Payne ruling as being specific to the case of the person receiving the benefit being an employee. I don't think the case of Business Owners themselves earning points has been resolved in the courts.
 
Likely to smash the value of Qantas FF and Velocity.
Who was the private equity firm that bought into Velocity ??
 
When Rewards points credit cards started in Australia I do recall the initial information/advice from the ATO was that points earned would definitely be taxable. I vaguelly recollect this was an NAB internal memo advice, for those reasons we must be very careful when promoting these rewards options to our customers, and/or business customers. Not long after the word on the street was that the ATO would let it ride because it would have been to hard to calculate tax on the rewards, because of a personal/business mix and intangible value of rewards in many cases.

However I do hope the ATO finds the jokers who are running up millions of points by paying business expenses, and blesses them with a new bumhole. Cant be that hard to do, just request from the banks a list of credit cards and the total rewards or turnover per annum. Then contact the top 100 or so and invite them over for a chat.
 
moa999 said:
Likely to smash the value of Qantas FF and Velocity.
Who was the private equity firm that bought into Velocity ??
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What proportion of total FF point earn would you estimate comes from business owners using cards for business expenses?
 
theblank said:
However I do hope the ATO finds the jokers who are running up millions of points by paying business expenses, and blesses them with a new bumhole. Cant be that hard to do, just request from the banks a list of credit cards and the total rewards or turnover per annum. Then contact the top 100 or so and invite them over for a chat.
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Or just troll around here. Read some bragging posts and do some data mining....
 
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Nutcase said:
Or just troll around here. Read some bragging posts and do some data mining....
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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.
 
Funny the ATO going after such high hanging fruit as FF points. Wonder how much "business travel" has dropped off the past 10 years which is near impossible to manage.

With corporates and governments paying invoices out to 90 days, typical small-medium sized companys constantly have their cashflow squeezed having no choice but to use personal or business credit cards to meet creditor and tax payments. Regardless of whether personal or business credit cards are used for business spend noting there is little between them these days, the banks still hold the business owner personally liable for the card debt.

It would be interesting to know the ATO's total bad debt levels and amount written off annually. It is still far too easy to set up a company, trade for two to three years without paying any tax before being closed down without any penalties imposed. A reasonable sized small company would involve ATO debts of around $5million with the same owners starting all over again, often with just a slight name change. This major issue could readily be fixed by placing a "hold" or "freeze" against the ABN of companies more than 3 months late in their ATO payments or reporting obligation. This would then require other companies to deduct a 48.5% withholding tax from any payment made to a company with a "freeze" on their ABN.
 
deejo77 said:
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.
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The BWA transaction product casualties may disagree.
 
deejo77 said:
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.
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Haha, good idea, never thought about that, its so obvious. Even though I reckons there is heaps more spent on business expenses, and supplies than is been sent to Taxman, but seriously, anyone *regularily* paying GST or Tax instalments by a credit card (or reward pay) is so obviously a massive indicator of chasing the rewards points, its a no brainer.

The AMEX surcharge alone is more than one months typical interest so arguing that its 'borrowing money from the bank for cashflow reasons" is a fairly pathetic excuse. (visa/mc would be about a months interest give or take loose change)

The ATO really only has to hit on the top 10 abusers of this for the media to report it and then put the wind up the sales for the rest. Cheap exercise.
 
theblank said:
Even though I reckons there is heaps more spent on business expenses, and supplies than is been sent to Taxman, but seriously, anyone *regularily* paying GST or Tax instalments by a credit card (or reward pay) is so obviously a massive indicator of chasing the rewards points, its a no brainer.
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Not so sure its quite that easy to make this case. Can just imagine the ATO saying this in court and the barrister representing the other side saying "so if you think this, why exactly are you facilitating this by making this option so readily available?".

Personally I think this is an attempt to scare people off rather than a serious attempt to change practice. With recent card changes it's also somewhat of a moot point, payments to the ATO by CC (to gain FF points) is already becoming difficult and much less productive.
 
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