ATO (tax office) payments by credit card

[cove]

I will ask to see if American Express has eased up on this rule. If your card were to get suspended while they cut a cheque to repay the credit balance it could be embarrassing when you are part way through paying the ATO.

 

[cove]

American Express have charge cards that can definitely be put into a credit balance as has been reported.
American Express have credit cards all of which are not meant to be put into credit. Now obviously Amex customers will sometimes pay twice or accidentally get their credit card into credit. If you leave the card in credit balance for more than a few days then you should expect the card may stop working while a cheque is being prepared and mailed to you. That outcome would not help you pay your ATO bill on time.
If the ATO bill is say 3 times your credit limit you do 3 separate payments to the ATO and re-load the card every 3 working days if you want to use their card exclusively and don't do BPay.
I am purely covering directly issued AMEX cards and not ones that are co-branded like a Westpac Amex card that can be put into credit based on my experience.

 

[drron]

Although I dont prepay my Amex I have found no problem doing a Bpay to my Amex an hour or two after paying the ATO and then the next day paying my next instalment to the ATO or paying for the next trip.

 

[cove]

Yes drron BPay is the easiest way to eliminate the time delays that apply to telephone banking as the funds get to your account very quickly if you do the transaction in the morning.
I try to BPay most credit cards now.

 

[amaroo]

Yes drron BPay is the easiest way to eliminate the time delays that apply to telephone banking as the funds get to your account very quickly if you do the transaction in the morning.
I try to BPay most credit cards now.

You can call Amex and transfer over the phone for immediate (before you hang up) deposit in their system....money doesn't come out of your account for 1-2 days or more if processed over a weekend/public hols.

 

[cove]

Yes amaroo that method is good but there is the 3 clear banking days before doing the next phone pay. It can give you interest on money over the weekend and you can pay the ATO so it can be a nice plan if the amount is a biggie.

 

[QF WP]

You can call Amex and transfer over the phone for immediate (before you hang up) deposit in their system....money doesn't come out of your account for 1-2 days or more if processed over a weekend/public hols.

+1 - it's the method I use to pay my Amex bill - ensures that the funds get credited on that date (even though not taken from your bank account), rather than BPAY which takes a couple of days - nothing more frustrating than having to ring up to have the interest reversed.

Ah, now I see it's not as beneficial for the ATO "pay your tax" by instalments - BPAY there would be much better.

 

[wafliron]

I believe it is mentioned (you ≡ entity ≡ company) see the red bit: (Credit card payment fee deductibility guidelines)

I took "you" in that document to mean an individual, but what you say makes sense.

IMHO companies should be able to deduct the fee in the same circumstances as sole traders can because the same rules apply to both concerning the deductibility of interest paid on borrowings to pay tax and thus the same rules logically should also apply to CC fees on a borrowing to pay tax:

ATO ID 2006/269 - Deductions and Expenses: interest incurred on moneys borrowed by a sole trader to pay income tax

Which means, I believe, that the fee is deductible under s8-1 whether or not the card is in credit.

Thanks. That document also links to IT 2582 - INCOME TAX : DEDUCTIBILITY OF INTEREST INCURRED ON MONEYS BORROWED TO PAY INCOME TAX (As at 18 April 1990), which explicitly states companies can claim interest expenses incurred as a result of paying income tax liabilities as a tax deduction.

That being said, both of the above documents specifically pertain to interest, not the CC surcharge (CPF in ATO lingo). Is it a safe assumption that the ATO applies the same rules to both? I would think yes, but this goes against the statements made on Credit card payment fee deductibility guidelines (CPF only deductible if you didn't borrow money to pay the income tax bill), assuming sertfy's interpretation of "you" is correct.

But check with your accountant. This is not advice.

Course it is - just of a general nature and not specific to my individual circumstances

Sorry to go on about this BUT:

I can BPAY\Load a $5K LIMIT card with 12K.
PAY $6850 BAS .
Get QFF points(even though in credit)????????
Only exception is American express BRANDED cards.

As others have said, yes you can do this - but be aware that most (all?) CCs won't let you put a transaction through the card for an amount greater than your credit limit, even if there are sufficient funds due to the card being in a credit balance. Not a big deal - you just break the amount up into multiple smaller payments - but good to be aware of.

What Amex cards can't go into credit??
Have definitely put my Plat Charge into credit for ATO bill, albeit only for a day.

Platinum card is a charge card, not a credit card... different set of rules.

Does anyone know if the charge is considered a "purchase" the 1.99% interest rate for 6m is too good (special offer) so might shift to the Plat Credit
http://www.americanexpress.com/australia/pdfs/aus_termsandconditions_199_q1_2012.pdf

AFAICT tax payments seem to be treated as "purchases" by CC providers, so I'd guess that the answer is yes. Not 100% sure though - ask Amex.

 

[serfty]

...

AFAICT tax payments seem to be treated as "purchases" by CC providers, so I'd guess that the answer is yes. Not 100% sure though - ask Amex.

I asked my accountant - he researched and came back with it being deductible. (He also likened these CC fees to business credit/charge card fees, business bank account fees, business overdraft interest etc. in reference to they are tax deductible and none attract GST.)

 

[wafliron]

I asked my accountant - he researched and came back with it being deductible. (He also likened these CC fees to business credit/charge card fees, business bank account fees, business overdraft interest etc. in reference to they are tax deductible and none attract GST.)

Thanks serty, that's what I wanted to know. This answer was in the context of a Pty Ltd company, not a sole trader or any other business structure?

 

[cove]

Yes there is no GST on the credit card fee with the ATO. With our office credit card fee it is 0.7% plus 10 per cent GST so the ATO rate for Visa and MasterCard is quite brilliant.
There would still be many paying with American Express to get the greater number of points but when I see $50,000 paid for a fee of $240 I think that cost is the sweetest thing the ATO has ever done.

 

[Stephen65]

Thanks. That document also links to IT 2582 - INCOME TAX : DEDUCTIBILITY OF INTEREST INCURRED ON MONEYS BORROWED TO PAY INCOME TAX (As at 18 April 1990), which explicitly states companies can claim interest expenses incurred as a result of paying income tax liabilities as a tax deduction.

That being said, both of the above documents specifically pertain to interest, not the CC surcharge (CPF in ATO lingo). Is it a safe assumption that the ATO applies the same rules to both? I would think yes, but this goes against the statements made on Credit card payment fee deductibility guidelines (CPF only deductible if you didn't borrow money to pay the income tax bill), assuming sertfy's interpretation of "you" is correct.

I can see no logical difference when it comes to deductibility between (1) interest paid on a borrowing to pay tax and (2) CC fees incurred when you use a CC to pay tax. Both are a cost of obtaining funds to satisfy a tax bill and if the first is deductible to companies and sole traders then so should the second.

The credit card deductibility guidelines you refer to appear to be a potted (and somewhat poor) attempt to summarise three Interpretative Decisions issued by the ATO:

ATO ID 2010/159 - Deductibility of card payment fee incurred in paying income tax liability under section 8-1 of the ITAA 1997
ATO ID 2010/160 - Deductibility of card payment fee incurred in paying income tax liability under section 25-5 of the ITAA 1997
ATO ID 2010/161 - Deductibility of card payment fee incurred in paying income tax liability under section 25-25 of the ITAA 1997

These deal respectively with the question whether the CC fee is deductible to an ordinary wage and salary earner under three provisions, s8-1 (general deduction for costs of earning income), s25-5 (cost of managing tax affairs) and s25-25 (expenditure incurred in borrowing money to produce income).

In short the ATO says an ordinary wage and salary earner is not entitled to a deduction under any of these provisions but for different reasons:

8-1 and 25-25: because the CC fee is not a cost incurred by a wage and salary earner in earning their income, this is because the payment of tax is something that occurs after that income earning process is finished
25-5: because there is a specific exemption in this section for expenditure incurred in borrowing money including interest

It's these IDs that are summarised in the credit card guidelines and which have given rise to the view that wage and salary earners can get a deduction under 25-5 provided that they do not borrow to do it i.e. by making the payment out of a CC that is in credit. However, these three IDs issued by the ATO are expressly limited to wage and salary earners. The ATO has said nothing about the circumstances in which either sole traders or companies might get a deduction for a CC fee.

Further, the reasoning used in these IDs to deny a deduction under s8-1 is reasoning that does not apply to sole traders and companies because as set out in the rulings about deductibility of interest on borrowings under 8-1 I linked to above (in particular IT 2582) the payment of tax IS considered to be part of the income earning processes of those entities, as that ruling states:

"...it is considered that the interest incurred on those borrowings is a normal incident of conducting that business. That is, such an expense is an expense incurred in carrying on that business and hence qualifies for deduction under [what was the former version of s8-1]"

Contrast this with the reason given by the ATO why 8-1 does not apply to wage and salary earners in ID 159/2010:

A careful analysis of the character of the fee indicates that it is not an expense incurred in earning the taxpayer's assessable income - salary or wages. It is a payment out of income after it has been earned.

Given that the ATO recognises this distinction I cannot see any reason why the same reasoning used in IT 2582 and 2006/269 would not apply to CC fee deductions. This is why I believe sole traders and companies should be entitled to a deduction for the CC fee under s8-1 and thus do not need to worry about making the payment out of a CC that is in credit.

(the above is subject to all the usual disclaimers etc)

PS: When it comes to companies to get a deduction for the CC fee the CC used will have to be the company's card. If you use your personal card to pay the company's tax bill then it's very difficult to see how the CC fee charged to you could be deductible to you because its not a cost of you earning your income.

 

[drron]

I am starting to have some nasty thoughts.
Pay my second quarter BAS on Friday 29/6.Gets in before tha Amex earn rate drops + brings forward tax revenue to this financial year just making it that little bit harder for Wayne Swan next financial year.
Told you I was nasty!

 

[sumthinfornuthin]

would be tragic if someone slipped up a couple of decimal points when they paid and then call the ATO a couple of weeks later to get them to refund by cheque !

 

[Rallygirl]

would be tragic if someone slipped up a couple of decimal points when they paid and then call the ATO a couple of weeks later to get them to refund by cheque !

That happened to me for the Dec BAS - Pity about all those extra points. Unfortunately I still haven't got refund yet so assume ATO is waiting for my 2011 annual return to be lodged and/or the Mar BAS.

 

[diningdecadence]

Hi all,

Any chance getting a sticky at the front of this thread for us late comers so we don't have to skim through 86 pages? Or is it no pain no gain?

Am thinking of asking the bosses whether I can start putting the co. Through my personal card (we're a small biz). If they say no I can at least suggest they do it themselves on the bank branded Amex.

Recent couple of pages suggest using a Amex branded c/c won't work for putting into credit then paying so what would be the card of choice? Is the only 1-1 QFF card the woollies one? Or is there a card with a better earn than 1-1 for QFF?

Cheers

 

[PLANT]

Money came thru BPAY on Jetstar card REQUIRED two days!
Thanks for the SPLIT the total to fall under the LIMIT of card!
Another 16K points for $30 deductible!

 

[cove]

Enjoy your next QF ride PLANT you have earned it.
Just finished off my first BAS early so I can concentrate on 7 other ATO bills that are due by 28th rather than 21st.

 

[burmans]

PS: When it comes to companies to get a deduction for the CC fee the CC used will have to be the company's card. If you use your personal card to pay the company's tax bill then it's very difficult to see how the CC fee charged to you could be deductible to you because its not a cost of you earning your income.

Not sure of the logic here, plenty of companies reimburse expenditure made on employees credit card, the question is surely as to whether it is a deductable expenditure to the company rather than deductable to you?

The guidelines for companies are quite different to individuals

http://www.ato.gov.au/businesses/co...htm&pc=001/003/011/005/006&mnu=0&mfp=&st=&cy=

The only bit that is problematic is

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 of my company tax payments are for GST and PAYG withholding but there is a small amount related to PAYG Installments which are income tax related and hence may be caught under the first provison.

 

[Stephen65]

I think you are right; you could structure it so that you pay the company's tax bill plus surcharge on your own CC and then the company reimburses you and claims a deduction for the surcharge reimbursement. That way it would be neutral to you. If the surcharge would be deductible to the company if it paid it directly then a reimbursement of the same surcharge if paid on behalf of the company would probably also be deductible. Depending on the size of the company and the amount of tax the ATO might get curious as to why the company is using its employees CC's to pay its tax instead of its own CC or other financial resources.