ATO (tax office) payments by credit card

[ProggerPete]

Also worth noting that the stipulation that you must "not borrow money from your card provider to make the payment" in order for the surcharge to be deductible is only in the context of an income tax liablity.

There is no such restriction for GST, WET, FBT, Luxury Car Tax, PAYG Instalments, Student Loans and presumably any Superannuation Guarantee charges.

Even if you can't claim the tax deduction it makes more sense to use your credit. 0.5% on a 10k payment is $50. If you are in the highest income bracket you'll get back $25 as a tax deduction. If you instead pay on credit and leave the 10k in ubank for 30 days you'll get 10k * 0.04 * 30 / 365 = $32.88. The other difference is you get to pocket the interest straight away, but will likely wait many months before seeing your $25 tax deduction.

The only time it would make sense to worry about getting the card into credit is when you're going to need to pay off the credit card before your interest free period runs out. i.e. you need to make payments with the card but you've used your whole limit already.

 

[Jack_OC]

Even if you can't claim the tax deduction it makes more sense to use your credit. 0.5% on a 10k payment is $50. If you are in the highest income bracket you'll get back $25 as a tax deduction. If you instead pay on credit and leave the 10k in ubank for 30 days you'll get 10k * 0.04 * 30 / 365 = $32.88. The other difference is you get to pocket the interest straight away, but will likely wait many months before seeing your $25 tax deduction.

Some flaws in your logic there I’m afraid! To maximise points now you have to use a bank-issued Amex, which attracts a fee of 1.45%, or $145 on a 10k payment. If you’re in the top tax bracket, you’d get back $67.42 if you can claim it as a tax deduction. If you put the money in a savings account for 30 days, you might earn $32.88 gross, but you have to pay tax on that - $15.28 to be precise if you’re in the top tax bracket, so you’d only come out with $17.70. That’s a difference of $49.72 in favour of putting your card in credit and claiming a deduction.

When you consider that many people are paying bills 10-20 times higher (or more) than the $10k in your example, the difference becomes $500-$1,000 (or more) in favour of putting your card in credit and claiming a deduction.

The only time it would make sense to worry about getting the card into credit is when you're going to need to pay off the credit card before your interest free period runs out. i.e. you need to make payments with the card but you've used your whole limit already.

Also bear in mind that even people with 6 figure tax bills generally don’t have 6 figure credit card limits (or anywhere close to that). So even if they don’t need the card for anything else, most people have to pay a portion of the bill, then pay off the balance immediately, then pay more and repeat until done. So the interest saving by using credit would only apply to a fraction of the total tax bill.

 

[ProggerPete]

Some good points there Jack.

On Amex vs Visa, the choice is effectively between 0.25c/point for 1:1 or 0.75c/point for 1.5:1 once the deduction is taken into account. I'm early enough in the points getting game that I'm happier with cheap. Once I'm more familiar with using the points effectively this may change.

Your point that you get taxed on the interest earned is something I had overlooked and it definitely swings things back in favor of paying with your own cash. In my case all interest bearing accounts are in my wife's name which avoids the problem. Without this option I'd be with you in wanting to claim the deduction.

 

[johnself]

Having just retired the Citibusiness Gold Card and received the WOW EDR card can anybody reliably inform the best way to pay ~$30,000 ATO bill on a $10,000 limit card? With citi I would have loaded the card with $10,000 each day over three days as I processed transactions - similar strategy for EDR?

 

[Jack_OC]

On Amex vs Visa, the choice is effectively between 0.25c/point for 1:1 or 0.75c/point for 1.5:1 once the deduction is taken into account. I'm early enough in the points getting game that I'm happier with cheap. Once I'm more familiar with using the points effectively this may change.

You’re correct that it’s a choice between a lower fee per point and fewer points (MC/Visa) or higher fee per point and more points (Amex), and different people will have different views on which way to go.

However, it’s important to be aware that the cost is not 75c per point with Amex after the deduction, it’s 51c per point (assuming you’re in the highest tax bracket). Using $10k as an example again:
Fee: $145
Fee after deduction: $77.58
Points earned: 15,217 (you earn points on the total amount paid – including the fee)
Cost per point = 7758/15217 = 51c.

With regard to the MC or Visa option, your cost per point is correct if you can earn 1 point per $. However, I believe you can only do that with direct earn QF or VA cards – so if you’re happy to be locked in to a specific FF programme that’s fine, but I’m not. Among the MC or Visa cards that allow conversion to a choice of FF programs, AFAIK the best you can get is 0.625 points per $, and most only earn 0.5 points per $. If you use one of those cards, you would pay either 41c or 51c per point, but earn a lot fewer points.

Your point that you get taxed on the interest earned is something I had overlooked and it definitely swings things back in favor of paying with your own cash. In my case all interest bearing accounts are in my wife's name which avoids the problem. Without this option I'd be with you in wanting to claim the deduction.

That’s a good point, and actually I could avail of that option too (although I’d need my wife to open a new account first!). Also, I have an offset account on my home loan, so I can effectively earn interest tax free that way (at 5.65%). But the fact is, the limit on the card I’m going to use on my upcoming tax bill is only about 15% of my total bill, so the actual interest I’d save would be just 15% of the theoretical total. That makes that option a complete non-starter for me.

I agree if you have a bill that you can pay off within your credit limit, and you’re planning to use a Visa or MC, then preloading for the deduction is a waste of time. However, if you have bill larger than your credit card limit, and/or you plan to use an Amex, you would be way better off with the deduction. Horses for courses!

EDIT: actually even the direct earn Velocity MC/Visa cards seem to only pay 0.5 pts/$, and some are provided by Citi (so will now earn nothing). So other than QFF direct earn cards, I don't think you can do better than 0.625 points per $ unless you use Amex.

 

[serfty]

Having just retired the Citibusiness Gold Card and received the WOW EDR card can anybody reliably inform the best way to pay ~$30,000 ATO bill on a $10,000 limit card? With citi I would have loaded the card with $10,000 each day over three days as I processed transactions - similar strategy for EDR?

If you do something like that, (unless it's personal tax) you will soon find WOW cancelling the card.

(http://www.australianfrequentflyer....worths-qantas-credit-card-canceled-36004.html)

 

[johnself]

If you do something like that, (unless it's personal tax) you will soon find WOW cancelling the card.

(http://www.australianfrequentflyer....worths-qantas-credit-card-canceled-36004.html)

thanks serfty - i was aware that some people got their accounts flagged, however others have reported success with ATO payments and hence the query regarding the best way to process them.

 

[cove]

Paying 4 amounts to the ATO in your first month of the card may cause you a problem. You need to give them "hope" so go to Woolies at least once ,maybe do Big W for some chocolates or whatever and mabe a few bucks on some alcohol in between say $7500 plus fee to the ATO each week. Make sure you scan your EDR on the back of your credit card to look like they have you in their clutches (if you spend more than $30). BPay to zero then try that again.
Look like genuine customer and play it your way along that theme. You might fall in love with Woolies if they don't cancel you.

 

[serfty]

thanks serfty - i was aware that some people got their accounts flagged, however others have reported success with ATO payments and hence the query regarding the best way to process them.

as cove indicated, don't use it just for ATO - your post had little indication of such planned other use.

 

[Deleted User]

Having just retired the Citibusiness Gold Card and received the WOW EDR card can anybody reliably inform the best way to pay ~$30,000 ATO bill on a $10,000 limit card? With citi I would have loaded the card with $10,000 each day over three days as I processed transactions - similar strategy for EDR?

How often will you have to pay 30k...? I would suggest pre-paying tax over a period of time if using the QEDRCC...

I would be very careful putting more than 10k on that card per month, I have done ~15k and was ok, but I think 20k or 30k will flag an issue...

Another thing, what taxable income did you report when applying for the card...? Hard to justify a $30k tax payment unless you reported an income high enough to cover a 30k "personal" tax bill

 

[Deleted User]

if you are paying something like $20k to $30k on this card to the ATO, then do it over a few months (pre-pay before due)

Over $50k payments and you have a really good chance of losing the card...

Be careful

 

[pauly7]

2 updates not sure if first is 'new' news:

1) Just got letter. Gold BMW Amex affiliate card dropping back to 0.5pts for ATO from July 22

2) Citibank Signature card just posted full points again. Must be still holes in their net!

 

[drross]

2 updates not sure if first is 'new' news:

1) Just got letter. Gold BMW Amex affiliate card dropping back to 0.5pts for ATO from July 22

2) Citibank Signature card just posted full points again. Must be still holes in their net!

just received the Gold AMA Amex letter re ATO as above .. My card is a platinum one!

 

[cove]

The posts tonight have me walking towards my desk to hit up an Amex card to the max. I can do that as the auto pay has cleared the balance. The points cost more than Citi Select by a country mile but I can still get a good deal on direct Amex Ultimate until July 21st.

 

[Deleted User]

Cove, at least it's quarterly tax time again, so make hay while.....

I'm going to pre-pay some tax, may as well take the points while they are still there, who knows what will happen... One thing I do know is that I still have lots more tax to pay this year, so may as well be ahead of the curve and get in front a little...

 

[cove]

Just picked up 144k of QF points for my life long partner so that is enough for a Classic one way to LAX in First out of the east coast. Well that was a productive few minutes with the cost running out at $1377 gross. If this one goes tax deductible then it could be $700 plus fuel levies for the joy ride.

 

[Mattyana2003]

So who now is not allowing ATO points?
Citibank
Amex Ultimate from July
Amex AMA down to .5 points
Amex BMW down to .5 points

 

[DIVIC]

Well, I just put a small ATO payment with my Virgin High Flyer card and the points did not seem to post. I just checked my statement and the points posted were minus ATO. Is that because it is with Citibank?

 

[DaleS]

Well, I just put a small ATO payment with my Virgin High Flyer card and the points did not seem to post. I just checked my statement and the points posted were minus ATO. Is that because it is with Citibank?

Exactly. I argued with them over 7,000 points not showing on the last statement and was informed that 'points are not earned for those transactions sir' After quite a few minutes asking them to point out where in the TC's that was stated & why was there no letter or info re this she checked with her supervisor and came back with no again. Said she would try to add 2,000 points as compensation and get one of the accounts people to contact me. Haven't seen or heard re either of these yet.

 

[MelUser]

I am a bit lost as to why everybody here does not have NAB platinum card? 1.5 points per dollar for the AMEX only limit is 150 000 points per month so as long as you aren't paying for more than 100,000 in tax per month you would be fine.