Paying tax by credit card and earning points...true

Status
Not open for further replies.

Karen

Intern
Joined
Mar 4, 2005
Posts
58
Karen, you better check, because there is no way your getting 0.8% merchant fee.

Actually that wasn't what I needed to check. I wanted to check that I wasn't breaking any clause of my merchant agreement or any laws. Which I'm not, so its all good.

But you are partially right, the fee I pay is 0.91%. Still $910 for 100k points still sounds OK to a few members I think. J Class LHR return for $2329 plus taxes does actually sound quite reasonable when you think about it.
 

QF WP

Enthusiast
Moderator
Joined
Jun 20, 2002
Posts
18,156
Qantas
Gold
Virgin
Platinum
I was looking for something else in the Qantas T&C's tonight and I think this might pop your little scheme:

9.1.3 Points will not be awarded in relation to any products or services that are cancelled, refunded or returned. Qantas may cancel or deduct any Points that have been awarded in relation to cancelled, refunded or returned products or services.
 

NM

Enthusiast
Moderator
Joined
Aug 27, 2004
Posts
16,755
Qantas
LT Gold
Virgin
Red
Hmm, I wonder if one could argue that its not a refund. Instead, one is purchasing a cheque for $9,900 using a credit card. The cost of purchasing this "product" is $10,000.

Just because someone buys 10 of these cheques (or products) in a short time does not mean they have asked for any of their purchases to be refunded. They have recieved their "product" for the purchase price.

But I am not going to test it out :p .
 

Karen

Intern
Joined
Mar 4, 2005
Posts
58
Not so grasshopper...

I have paid money into my solicitors trust account before by credit card which was subsequently refunded and I received FF points - this is no different.

It is being deposited in anticipation of future services. :wink:
 

ozstamps

Established Member
Joined
Aug 30, 2003
Posts
1,151
Virgin
Platinum
I have accepted all 5 types of cards for 25 years in my business.

Firstly Karen I simply to do not believe your rate is .8% inc GST for VISA/MC/BC. Woolworths pay more than that.

Secondly you'll lose your merchant account within minutes of pulling this.

Thirdly for an accountant to even suggest this for $100,000, will get you and those involved tied up like hogs in an audit I'd suggest.

Fourthly I'll get someone else to do my tax return, that's for sure. :p
 

oz_mark

Enthusiast
Joined
Jun 30, 2002
Posts
19,952
ozstamps said:
I have accepted all 5 types of cards for 25 years in my business.

One thing I have wondered for a long time about the 5 types of cards, is does anyone still actually use a Bankcard. I haven't even seen one for years, but I still see stickers at retailers saying they accept them.
 

JohnK

Veteran Member
Joined
Mar 22, 2005
Posts
43,829
NM said:
Hmm, I wonder if one could argue that its not a refund. Instead, one is purchasing a cheque for $9,900 using a credit card. The cost of purchasing this "product" is $10,000.

Just because someone buys 10 of these cheques (or products) in a short time does not mean they have asked for any of their purchases to be refunded. They have recieved their "product" for the purchase price.

But I am not going to test it out :p .
Good idea NM.

I guess that the feds will be all over the person/people attempting similar schemes especially if it happened on a regular basis.

Someone I once knew installed roller doors and most of the work was cash work. So to offset this he sold product & services to friends for ~$10,000-$20,000 where the net worth of the product & service is ~$2,500. He would use around 2-3 people per year. After a few years he stopped the practice. Luckily he has avoided any problems and audits.

This type of practice/scheme can be considered money laundering which carries severe penalties. I would hate to think trying to explain it to the judge that it is not money laundering but just trying ff points. This is called fraud. A few years in jail may not make the 256,000 points seem worthwhile.
 
Sponsored Post

Struggling to use your Frequent Flyer Points?

Award Flight Assist takes the hard work out of finding award availability and redeeming your frequent flyer or credit card points for flights.

Using their expert knowledge and specialised tools, the Award Flight Assist team at Frequent Flyer Solutions will help you book a great trip that maximises the value for your points.

Karen

Intern
Joined
Mar 4, 2005
Posts
58
You are seriously delusional

This type of practice/scheme can be considered money laundering which carries severe penalties. I would hate to think trying to explain it to the judge that it is not money laundering but just trying ff points. This is called fraud. A few years in jail may not make the 256,000 points seem worthwhile.

Money laundering is processing the proceeds of crime to make sure it had arrived from a legitimate source. How you think that putting money through your credit card and then being reimbursed for it is akin to money laundering is extremely bizarre.

I would also suggest that you have no idea what the ATO bases its audit activity around. Traceable transactions are not it. Although I could possibly get a desk query on what happened tot he money, a full scale audit would not happen because I can demonstrate through bank statements that the money went in and out. As long as the 1% is declared as income there is no breach of tax laws. The only truly scary parts of the ITAA are Part IV A and section 264. As this is not a scheme to avoid tax I am safe. Whether or not it is a scheme to obtain financial benefit which is a breach of the Crimes Act is a matter of opinion. On my part, it is not, so I have not a hesitation in the world saying that I would do. However, just because I CAN doesn't mean I will, or that I have in the past - it is just interesting that it is a LOT cheaper than buying the ticket direct from the airline, and the banks would definitely los all the deal - which warms my heart no end!

I know that it makes you feel better to think that their is no way I could have such a preferential rate as less than 1%, but I do so how about you shelve the envy and get it that some industry groups have more muscle with financial institutions than others?
 

Maca44

Established Member
Joined
Sep 2, 2005
Posts
1,309
If anyone does take up Karen's option, which from a personal point of view I think is great, just remember not to use an ANZ Qantas Gold Visa Card because you earn QF FF points get a ratio of 1:1 up to $2500, and then you only earn a ratio of .5:1 FF points after that amount.
 

JohnK

Veteran Member
Joined
Mar 22, 2005
Posts
43,829
Re: You are seriously delusional

Karen said:
Money laundering is processing the proceeds of crime to make sure it had arrived from a legitimate source. How you think that putting money through your credit card and then being reimbursed for it is akin to money laundering is extremely bizarre.
When you have a cash business and you provide product and/or services to someone that are worth $2,500 and you receive a payment of $20,000 from them and re-imburse them $17,500 in cash/cheque/eft this is called money laundering. And yes it is a crime!!!! If you think that no-one audits these type of activities you are sadly mistaken.

Bad advice if you call yourself an accountant.

Karen said:
I would also suggest that you have no idea what the ATO bases its audit activity around. Traceable transactions are not it. Although I could possibly get a desk query on what happened tot he money, a full scale audit would not happen because I can demonstrate through bank statements that the money went in and out. As long as the 1% is declared as income there is no breach of tax laws. The only truly scary parts of the ITAA are Part IV A and section 264. As this is not a scheme to avoid tax I am safe. Whether or not it is a scheme to obtain financial benefit which is a breach of the Crimes Act is a matter of opinion. On my part, it is not, so I have not a hesitation in the world saying that I would do. However, just because I CAN doesn't mean I will, or that I have in the past - it is just interesting that it is a LOT cheaper than buying the ticket direct from the airline, and the banks would definitely los all the deal - which warms my heart no end!

I know that it makes you feel better to think that their is no way I could have such a preferential rate as less than 1%, but I do so how about you shelve the envy and get it that some industry groups have more muscle with financial institutions than others?
You have no idea what I do or don't know about ATO audits. Someone I know is very high up in the ATO audit section in Sydney. I get a lot of valuable advice from him. If you would like to meet him I could simply organise an audit of your services and all your clients free of charge.

And frankly my dear what you are contemplating is fraud. Read the conditions of the ff program. You are accepting money in one form and refunding it in another way.

Just as well I have a decent accountant that gives me sound advice not shoddy schemes that may end up putting me in jail.
 

BlacKnox

Active Member
Joined
Jan 29, 2005
Posts
735
Re: You are seriously delusional

JohnK said:
You have no idea what I do or don't know about ATO audits. Someone I know is very high up in the ATO audit section in Sydney. I get a lot of valuable advice from him. If you would like to meet him I could simply organise an audit of your services and all your clients free of charge.

Insert big thumbs down non-smiley here :!:
 

JohnK

Veteran Member
Joined
Mar 22, 2005
Posts
43,829
Re: You are seriously delusional

BlacKnox said:
JohnK said:
You have no idea what I do or don't know about ATO audits. Someone I know is very high up in the ATO audit section in Sydney. I get a lot of valuable advice from him. If you would like to meet him I could simply organise an audit of your services and all your clients free of charge.

Insert big thumbs down non-smiley here :!:
My humour did not come across again. (insert smiley) :D
 

Karen

Intern
Joined
Mar 4, 2005
Posts
58
what you are contemplating is fraud

Its a very big leap from saying what I *can* do to think that I am contemplating it. I think that I have a far better idea of what the ATO targets than a guy who has a drinking buddy that works for the ATO, even if it is Michael Carmody himself.

Every 6 months the ATO issues a document called a "Compliance Program". It is distributed to all registered Tax Agents. It contains information on what areas of the law (which does after all stretch over for weighty volumes) the ATO will be targetting in the forth coming period. The ATO does not generally concern itself with whether or not income comes from illegal sources, although it may refer matters to the Federal Police if warranted. However, this is not a federal crime, if it is a crime at all (which is doubtful) and they do not generally exchange information with state government agencies.

You inferring this is in some way laundering is so off base it is laughable. Money Laundering is the process of concealing the true source of illegal funds. For starters funds received this way would hardly be illegal and they are not disclosed in any other way that that in which they are received. Its a bit hard to lie when its on your merchant statement as being received. But then its also hard for the ATO to disallow something for which a cheque has been drawn, the encashment appears on a bank statement for it, it is traceable to a third party account, and it is properly dislosed in the trust ledger. What exactly is being laundered?

I take an amount into my trust account. I take it via credit card receipt. I have disclosed to the client that there will be a 1% fee to offset my credit card transaction fees, and I deduct said fee and record it in the trust ledger along with the receipt of money. At some future time my client requests a refund of the amounts held in trust for the client, so I issue the client with a cheque drawn on the trust account. I have no agreement with my credit card provider that I am not allowed to make a refund in this manner if the funds were received by way of credit card payment. As such I have breached no agreement and broken no laws. In fact I have properly operated my trust account. As a result of this transaction the client earns a benefit with a third party which it has been established in Payne's case is not taxable income. There is insufficient nexus with income earning activities for this to become attributable income as no service was in fact rendered.

Purely from a legal perspective, I see nothing wrong with it. On the question of ethics - that is another question entirely. Being able to do something does not necessarily mean that you should.
 

johnsmith

Member
Joined
Dec 5, 2004
Posts
100
Karen said:
what you are contemplating is fraud

Its a very big leap from saying what I *can* do to think that I am contemplating it. I think that I have a far better idea of what the ATO targets than a guy who has a drinking buddy that works for the ATO, even if it is Michael Carmody himself.

Every 6 months the ATO issues a document called a "Compliance Program". It is distributed to all registered Tax Agents. It contains information on what areas of the law (which does after all stretch over for weighty volumes) the ATO will be targetting in the forth coming period. The ATO does not generally concern itself with whether or not income comes from illegal sources, although it may refer matters to the Federal Police if warranted. However, this is not a federal crime, if it is a crime at all (which is doubtful) and they do not generally exchange information with state government agencies.

You inferring this is in some way laundering is so off base it is laughable. Money Laundering is the process of concealing the true source of illegal funds. For starters funds received this way would hardly be illegal and they are not disclosed in any other way that that in which they are received. Its a bit hard to lie when its on your merchant statement as being received. But then its also hard for the ATO to disallow something for which a cheque has been drawn, the encashment appears on a bank statement for it, it is traceable to a third party account, and it is properly dislosed in the trust ledger. What exactly is being laundered?

I take an amount into my trust account. I take it via credit card receipt. I have disclosed to the client that there will be a 1% fee to offset my credit card transaction fees, and I deduct said fee and record it in the trust ledger along with the receipt of money. At some future time my client requests a refund of the amounts held in trust for the client, so I issue the client with a cheque drawn on the trust account. I have no agreement with my credit card provider that I am not allowed to make a refund in this manner if the funds were received by way of credit card payment. As such I have breached no agreement and broken no laws. In fact I have properly operated my trust account. As a result of this transaction the client earns a benefit with a third party which it has been established in Payne's case is not taxable income. There is insufficient nexus with income earning activities for this to become attributable income as no service was in fact rendered.

Purely from a legal perspective, I see nothing wrong with it. On the question of ethics - that is another question entirely. Being able to do something does not necessarily mean that you should.


I agree there should be no problems with this, how long does it take for the funds to appear in the merchant account. I would have approximately 56 days interest free on my CC, if I were to do this with $100,000 dollars I could invest the funds returned by cheque in my high interest account paying 6% thus earning me approx $900.00 in interest.
 
Status
Not open for further replies.

Enhance your AFF viewing experience!

From just $6 we'll remove all advertisements so that you can enjoy a cleaner and uninterupted viewing experience.

And you'll be supporting us so that we can continue to provide this valuable resource :)


Sample AFF with no advertisements? More..
Top