ATO (tax office) payments by credit card

[WA flyer]

If you have a Citi Select and transer to Krisflyer or Velocity it's probably better than Amex for ATO payment.

If paying a bill for $10,000 it's 15,000 pts and $125 for Amex or 13,333 pts and $65 with Citi Select.

So $60 for 1667 pts!

 

[moa999]

How are people's accountants interpreting the guidance notes on deductibility

 

[New Chump]

How are people's accountants interpreting the guidance notes on deductibility

My accountant agreed with my conclusion (see post no.312 in this thread: http://www.australianfrequentflyer..../ato-tax-office-payments-credit-17109-32.html )

that preloading the card with my own funds, then paying the ATO, caused the card payment fee to be deductible, as there is no "borrowing money" in making the payment on the card. My 09/10 return was lodged this week with the ATO claiming that deduction.

I paid other ATO card payment fees during 09/10 but did not pre-load the card with my own funds to do so. I did not claim these fees as a deduction.

NC

 

[KLN]

Yes, this is what i do also.

 

[moa999]

Of course, if you use a "Charge Card"¹ it basically becomes moot!²
¹ ... and pay in time
² ... unless it's a penalty or a Medicare type payment

Is that a view that a Charge Card (eg Amex Plat Charge) is not providing the user with credit, as the balance needs to be paid on full upon issue of a statement?

 

[serfty]

Is that a view that a Charge Card (eg Amex Plat Charge) is not providing the user with credit, as the balance needs to be paid on full upon issue of a statement?

Yes, that I believe is their perception.

Really no different from a standard Business invoice with a defined settlement period.

 

[Deleted User]

Yes, that I believe is their perception.

Really no different from a standard Business invoice with a defined settlement period.

But have you not "borrowed" funds until you have settled the statement...?

Would this not also be the case for a credit card if you have settled the full amount on the statement...?

My understanding of the ruling is that you need to pay with "your" money / funds, hence the account either needs to already be in credit or you credit the exact payment onto your card prior to making the ATO payment on your card...

I believe that the ATO would rule it is not a claimable deduction if you are using funds from a third party period...

 

[cove]

Once you have checked your own tax position with your accountant/tax agent you are then faced with needing to make a decision.
Do you hit up your tax office partner for the higher costing points thru your point and a half Amex card as these are 0.833 cents each but after tax deduction it might be a lot less for a lot more points?
Is there a problem with this I ask myself?

 

[burmans]

How are people's accountants interpreting the guidance notes on deductibility

Depends if they are business expense or salary and wageearner. From the ATO website

The CPF is deductible to the extent that:

• you incurred it as a result of paying an income tax liability and you did not borrow money from your card provider to make the payment
• you incurred it as a result of paying a goods and services tax, fringe benefits tax, luxury car tax or wine equalisation tax liability, and that liability arose in the course of gaining or producing your assessable income, or in the course of carrying on your business for the purposes of gaining or producing assessable income
• you incurred it as a result of making PAYG withholding payments where you can claim a deduction for the wages and salaries that gave rise to the withholding obligation
• you incurred it as a result of repaying your student assistance loans and then only to the extent that the expenses you paid using the student assistance loans were themselves deductible
• you incurred it as a result of repaying your employee’s student assistance loan, the repayment is a fringe benefit, and the employee’s wages are also deductible.

Most salary and wage earners come into the first category, i.e. can't borrow so have to pre-load. As a company about 95% of my tax payments goes on GST, PAYG. Fringe benefits where this restriction on borrowing does not apply.

 

[Ben174]

Well GOOD NEWS on the concern about earning points.

CBA GOLD Mastercard/Visa. $25,000 of BAS paid on Amex and statement just came in and points earnt for every dollar !. Guess its time to hit up the platinum for the extra points!

 

[jamesD]

Most salary and wage earners come into the first category, i.e. can't borrow so have to pre-load. As a company about 95% of my tax payments goes on GST, PAYG. Fringe benefits where this restriction on borrowing does not apply.

This is also how I view/apply the ato's policy.

 

[Deleted User]

This is also how I view/apply the ato's policy.

I also agree, but for a big payment I'm still going to pre-load the card with the exact amount a few days before paying via the ATO portal...

If I do this then there is no way the ATO can say I am borrowing money, yes my payments are totally business related but I still don't trust the ATO and I want my points & tax deduction...!

 

[jamesD]

I also agree, but for a big payment I'm still going to pre-load the card with the exact amount a few days before paying via the ATO portal...

If I do this then there is no way the ATO can say I am borrowing money, yes my payments are totally business related but I still don't trust the ATO and I want my points & tax deduction...!

Agreed! I have also done this in the past for larger payments.

 

[cove]

Tonight I was looking at my American Express Ultimate points earning and I was quite chuffed that the Tax Office processing fee earns 1.5 points as well as the tax payment.
Now that is a really obvious but also a very nice touch.

 

[Flashback]

Tonight I was looking at my American Express Ultimate points earning and I was quite chuffed that the Tax Office processing fee earns 1.5 points as well as the tax payment.
Now that is a really obvious but also a very nice touch.

As did the really expensive beers I drank in Norway

 

[KLN]

Ok, so the BAS is a couple of days late (for the first time in 11 years), but managed to load up AMEX with approx $45K worth of credit, and successfully put last quarters BAS and other quarterly payments on the card. thank you - 90,000 points. only 10k short of a return business upgrade to KL. bring on next quarter!

sorry for the delay on the TR to F1 in Malaysia and Shanghai too, but was too busy trying to get the stupid BAS up to date and reconcilng all the accounts.
will hopefully get something together in the next couple of weeks. photos have been done, just need the comments attached.

K

 

[burmans]

I also agree, but for a big payment I'm still going to pre-load the card with the exact amount a few days before paying via the ATO portal...

If I do this then there is no way the ATO can say I am borrowing money, yes my payments are totally business related but I still don't trust the ATO and I want my points & tax deduction...!

Not an accountant but the difference here is that under general tax principle a fee is tax deductable if the expense to which it relates is also tax deductable. Borrowing money to pay a companies tax IS normally tax deductable whereas borrowing to pay an individuals isn't.

Also not sure of this pre-loading policy, personally think this is better on the same day. The reason I say this is the way banks process payments, i.e. they don't match in the way you want them to. If you have a debit balance on the card payments will go to EXISTING debt whereas debit would create a NEW debt.

I think this approach is a reasonable approach myself unfortunately the ATO is NOT always totally reasonable. The best thing to reliy on is that for a business paying tax is a business expense (and hence deductable) whereas for an individual the ATO regard as a personal expense (and hence not). This latter is a tried and true principle both in ATO policy and has been tested in the courts.

 

[cove]

It is always best to discuss tax deductibility with your tax agent / accountant so you don't get that area incorrect.
Don't you just love making points out of your financial partner (the tax office) every time a bill comes?

 

[Stephen65]

Not an accountant but the difference here is that under general tax principle a fee is tax deductable if the expense to which it relates is also tax deductable. Borrowing money to pay a companies tax IS normally tax deductable whereas borrowing to pay an individuals isn't.

Your conclusion is right (at least for individuals who are salary earners and not sole traders) but not for the reason you give.

The rule for deductibility of an interest expense depends on the use of the funds borrowed. If the funds are used to earn income or run a business to earn income then the interest is usually deductible. Even if the use of the funds itself is not deductible (because for example its a capital expense) the interest on the funds borrowed may be.

While that is an interesting point of tax law it's not the reason why interest costs to borrow to pay tax are deductible for some taxpayers but not others. Let me explain:

When it comes to borrowing to pay your tax the ATO have for decades maintained a distinction between on the one hand salary earners and on the other hand companies and sole traders.

When it comes to salary earners the ATO position is that borrowing to pay your tax is not deductible because the payment of tax is not part of the income earning process, its something that occurs after you have earned your income and so its not a cost of earning that income and interest incurred to borrow to pay tax is not deductible.

However, when it comes to companies and sole traders the ATO position is that payment of tax is part of the income earning process so interest incurred when borrowing to pay your tax is deductible.

This distinction isn't entirely logical and may be over-generous to companies and sole traders but it is the ATO position and has been for a long time. Based on this precedent companies and sole traders who incur a credit card fee to pay their tax should be entitled to a deduction. This is probably why the ATO rulings on the deductibility of credit card fees incurred to pay tax are limited to salary earners.

DISCLAIMER: the above is not tax advice and no warranty is given as to its accuracy!

 

[burmans]

Your conclusion is right (at least for individuals who are salary earners and not sole traders) but not for the reason you give.

The rule for deductibility of an interest expense depends on the use of the funds borrowed. If the funds are used to earn income or run a business to earn income then the interest is usually deductible. Even if the use of the funds itself is not deductible (because for example its a capital expense) the interest on the funds borrowed may be.

While that is an interesting point of tax law it's not the reason why interest costs to borrow to pay tax are deductible for some taxpayers but not others. Let me explain:

When it comes to borrowing to pay your tax the ATO have for decades maintained a distinction between on the one hand salary earners and on the other hand companies and sole traders.

When it comes to salary earners the ATO position is that borrowing to pay your tax is not deductible because the payment of tax is not part of the income earning process, its something that occurs after you have earned your income and so its not a cost of earning that income and interest incurred to borrow to pay tax is not deductible.

However, when it comes to companies and sole traders the ATO position is that payment of tax is part of the income earning process so interest incurred when borrowing to pay your tax is deductible.

This distinction isn't entirely logical and may be over-generous to companies and sole traders but it is the ATO position and has been for a long time. Based on this precedent companies and sole traders who incur a credit card fee to pay their tax should be entitled to a deduction. This is probably why the ATO rulings on the deductibility of credit card fees incurred to pay tax are limited to salary earners.

DISCLAIMER: the above is not tax advice and no warranty is given as to its accuracy!

Thanks and happy to acknowledge probably more correct than my analysis.