Bankwest Qantas Transaction Account - Beats Paying Tax on Interest.

[medhead]

A revenue flight earns profit. Company tax is paid on profit.
An award flight is paid for by FF points which have no intrinsic value.
Regards,
Renato

Qantas earns profit on the redemption of points. Company tax is paid on profit. QFF has been a consistently high profit centre of the Qantas group.

 

[JohnK]

Most of us make choices, any of us whoever have taken both revenue flights and redemption flights (and I suspect that's most of us) have done exactly that, are you seriously suggesting you've never made a choice between the two?

Implying the ATO is losing revenue from award flights with a possible underlying message that frequent flyer points earned from flights should be taxed the same as income is drawing a long bow. It is simply not going to happen.

 

[Renato1]

You're the one clutching at straws. Your original premise was widely open to interpretation. "An investment that makes $10000". No limitation at all on how I make that investment - the structure etc. So as already pointed out, you've asked a question that required more information.

When I read a statement that says "An investment that makes $10000", I interpret it to mean an investment that makes $10,000.

However, when you read the statement that says, "An investment that makes $10000" you apparently interpret it to mean an investment that after interest is deducted can make something like $10,000 or $8000 or $5000 or $1000 or $0 or -$1000 or -$5000 or-$10000 etc - that is, anything at all.

May I suggest that I seriously doubt that my original premise was widely open to interpretation in the manner that you state.
Regards,
Renato

 

[Renato1]

With all due respect that's a really long bow.

The ATO has lost nothing. If I don't have the FF points I won't be booking those flights as revenue flights. Award flights are my reward for flying a lot.

Banks often reward people for keeping money in their vaults with something called interest.
Regards,
Renato

 

[medhead]

When I read a statement that says "An investment that makes $10000", I interpret it to mean an investment that makes $10,000.

I've highlighted your problem. I'm glad you can admit that the statement is subject to interpretation.

However, when you read the statement that says, "An investment that makes $10000" you apparently interpret it to mean an investment that after interest is deducted can make something like $10,000 or $8000 or $5000 or $1000 or $0 or -$1000 or -$5000 or-$10000 etc - that is, anything at all.

Once again - No, I don't read the statement that way. I read it exactly as per your interpretation. The difference is how I buy that investment, which may affect the tax liability. Regardless of how I buy the investment, it still makes $10000. There are 2 issues, making pocket money for the wife and separately paying tax on that income. That is not changed by how the accounts balance out. You can keep making up these strawmen to misrepresent my point, but it just looks like clutching to me.

May I suggest that I seriously doubt that my original premise was widely open to interpretation in the manner that you state.
Regards,
Renato

Actually, it is open to interpretation, you've said so yourself in the first sentence. Obviously your interpretation requires you to live and die by the final number in the accounts. My interpretation is that if I'm going to forego the earnings on 100's of thousands of dollars to make my wife happy and give her money, then I have no problem dropping in another $10000 in interest to maximise her pocket money and minimise my tax bill.

Seems like 2 widely different interpretations to me, which significantly alter the tax question posed.

 

[Benno]

You can keep making up these strawmen to misrepresent my point, but it just looks like clutching to me.

Do what I did, give up and move on. There's enough good information and perspective in the thread for a lurker to effectively analyse their own situation.

 

[JohnK]

Banks often reward people for keeping money in their vaults with something called interest.

And FF points depreciate in value. I must be missing something in this argument.

 

[Renato1]

I've highlighted your problem. I'm glad you can admit that the statement is subject to interpretation.



Once again - No, I don't read the statement that way. I read it exactly as per your interpretation. The difference is how I buy that investment, which may affect the tax liability. Regardless of how I buy the investment, it still makes $10000. There are 2 issues, making pocket money for the wife and separately paying tax on that income. That is not changed by how the accounts balance out. You can keep making up these strawmen to misrepresent my point, but it just looks like clutching to me.



Actually, it is open to interpretation, you've said so yourself in the first sentence. Obviously your interpretation requires you to live and die by the final number in the accounts. My interpretation is that if I'm going to forego the earnings on 100's of thousands of dollars to make my wife happy and give her money, then I have no problem dropping in another $10000 in interest to maximise her pocket money and minimise my tax bill.

Seems like 2 widely different interpretations to me, which significantly alter the tax question posed.

Glad to see that you now agree that my unambiguous statement of "An investment that makes $10000" means an investment that makes $10,000.

Now, how is such an investment treated for tax purposes on one's tax form?
Answer -
Add the Gross Profit to one's income in one's tax form, and
Subtract the interest expense earning that Gross profit.

So, in the case of an ungeared investment - add $10,000 and subtract 0
In the case of a a geared investment earning the $10,000 that both you and I mean, there are an infinite number of combinations e,g.
Add $15,000 Subtract $5000 = $10,000
Add $13,000 Subtract $3000 = $10,000
Add $20,000 Subtract $10,000 = $10,000
etc etc etc.

Regardless, of however you finance the geared investment, your tax will be calculated on $10,000 at your marginal rate.
Regards,
Renato

 

[Renato1]

And FF points depreciate in value. I must be missing something in this argument.

The equivalent to the depreciation is called monetary inflation.
Cheers,
Renato

 

[Renato1]

As I wanted to travel to the USA at near peak season, I redeemed my Qantas points at 1.7 cents per point.

My initial assumption in the original post was to value the points at 1 cent a point, leading to an effective interest rate 1.44% per annum after tax from the Bankwest transaction account.

But using the 1.7cents per point figure alters the effective interest rate to 2.448% per annum after tax. So, for someone on say the 32.5% tax bracket plus 2% medicare levy, that after-tax interest rate equates to a 3.74% pre-tax interest rate.

Which seems like a pretty good deal to me - though I'm still having difficulty deciding which cent per point rate I should use as the overall effective rate in my mind.

And as it turns out, soon after opening my account, when I didn't have much money in it - they deposited 3 cents in interest into my account.

So I am earning both Qantas points and interest on the account.
Regards,
Renato

 

[slinky123]

For those who have this account. Where in the Bank West online portal do I find how many QFF points I have earned?

 

[mannej]

Check your statement for the account

 

[robinsparkles]

Anyone know of any sign-up bonuses running currently?
I did a search, came up with nothing.

 

[Haplo]

I too have a BW Qantas Transaction Account. It is earn rate of 144 points per $100 deposit even if we value at 1:1 would be 1.44%, tax free. This is equivalent to 2.4% interest on a pre tax basis as the points earned is tax free.