Cove. Is it ok to load up the credit card with cash and then pay the tax bill by credit card? Does the ATO view this as being some kind of sneaky means to gain financial advantage by paying by credit card? Ive delayed our annual tax bill so our initial payment plus our July BAS is going to be of nightmare proportions.
Pre-loading the card, so you have a credit balance, will mean you are not "borrowing money" when you pay
Cove's girlfiend - you are using your own funds. Depends on your personal situation, but if you are a normal wage/salary earner then it should mean the ATO card payment fee is deductible. The ATO credit card fee deductibility guidelines say the fee is deductible as: "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". As the card was in credit, and you paid the ATO using your own funds (and not the card issuer's), the card payment fee is deductible.
My accountant sent a generic client newsletter to all her clients last Thursday, which may interest (or amuse) some of you:
Good Morning
I have been reviewing the advantages and disadvantages of paying your tax by credit card. The ATO now allows you to pay your tax by credit card but charges .48% for Visa and 1.25% for Amex.
The charges are deductible if you are carrying on a business or if you are an employee and not borrowing to pay the tax. If you do not use the frequent flyer points then it is costly paying by credit card.
You can pay your annual tax/IAS and BAS by credit card but there is a limit of $50,000 per transaction.
Accordingly, you need to check the limit on your credit card and may need to pay funds into the credit card so the payment will not be rejected if it exceeds your credit limit.
If your tax is say $200,000, then you would need to pay the $50,000 over 4 days and ensure there is sufficient funds available on your credit card. Please contact us if you need assistance.
I will now look at the cost and what you receive in points based on an ANZ Visa card and a Platinum Amex.:
Visa (based on half point for every dollar spent)
If your tax was $200,000 the credit card cost is $960 and after tax $514, you will receive 100,000 frequent flyer points.
An economy return flight to Paris is 128,000 points or an estimated cost of $4,700. Therefore, the saving is approximately $4,000 plus 28,000 more points required.
Amex (based on one and half points for every dollar spent)
If your tax was $200,000 the credit card cost is $2,500 and after tax $1,338, you will receive 300,000 frequent flyer points.
A business class return flight to Paris is 280,000 points or the estimated cost is $9,500. Therefore, the saving is approximately $8,000.
The above is based on an ANZ Visa card and Platinum Amex, it will differ depending on your credit card frequent flyer program.
Tip
Accordingly, it is worthwhile paying by credit card if you use the frequent flyer points. A trick I have used is to ring and book the flight as you can never find an overseas flight online. The cost is approximately 5,000 points to have them book for you. If the first person you ring cannot find a flight wait 10 minutes and ring again. It works every time!
I have personally not paid my tax by credit card as I have enough frequent flyer points with paying my business expenses by credit card. But if you have a family the above plan is very attractive.
I am now wondering whether I should change accountants, given (1) she sent me this THREE YEARS :shock: after JS first posted here on the subject (many thanks JS, by the way); and (2) she is only getting 0.5 points on her visa spend.
Hopefully my tax returns are getting better treatment.
NC
