ATO (tax office) payments by credit card

[albatross710]

those who are self employed, or partners in a partnership, paying quarterly PAYG instalments): unless the tax liability you are paying with your credit card is itself deductible (which the PAYG instalment liability normally isn't), then the card payment fee isn't deductible 1.
]

I don't think they have addressed the PAYG installment question. It is going to be difficult.

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

From this I infer that the surcharge on a PAYG installment which may be prepayment of the tax liability may make it non-deductible. Just imagine the mess if you do pay PAYG installments and then get a tax refund anyway..how would that work?

Under their Customer Charter I'll be pleading as a good tax payer that I made my best efforts:

Where the CPF relates to liabilities that are both deductible and non-deductible, the CPF would have to be apportioned on a fair and reasonable basis.

Alby

 

[medhead]

Upfront I'll say I haven't read the ruling and all that. So I'm just making theoretical comments.

It seems to me that the basis of PAYG payment needs to be considered. PAYG involves the employer paying the tax on behalf of the employee. Effectively the PAYG payment is part of the employees salary. Surely salary is a deductible expense for an employer? I guess this will fall over in the case of self employment arrangements, but still isn't the business the one making the payment of a deductible expense regardless of who is the employee.

In terms of claiming a tax return the employees tax affairs should be completely separate?

 

[cove]

Best Amex cards for deductible, Kris Visa for non deductible could work for most.
Points chasers would just go Amex even if the cost is a little higher.

 

[Stephen65]

The ATO have released three IDs (interpretative decisions setting out their POV) on this issue:

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

Each deals with a different section under which you might get a deduction for the CC fees being s8-1, 25-5 and 25-25.

So far they have only ruled on wage and salary earners. These IDs are not legally binding but you can take it that the ATO will administer the Acts on the assumption that they are correct.

When it comes to 8-1 deductibility, sole traders and companies may be in a different position because the ATO view has always been that interest a sole trader or company pays when borrowing to pay tax is deductible under s8-1 as a business expense:

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

By analogy their CC fees when paying tax may well be deductible under s8-1.

I also note that the ATO say on their website that:

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

If this is the ATO view an easy way to get within this exception may be to put your card in credit before you make the payment. This exception seems to be based on the view in 2010/160 that the reason you aren't entitled to a s25-5 deduction is that the CC fee is a cost which falls within the exclusion for "expenditure incurred...in borrowing money". If the transaction doesnt include a borrowing that ID seems to say that the CC fee is deductible under 25-5.


DISCLAIMER: This isn't legal or tax advice, just some interesting points put up for discussion.

 

[moa999]

To be clear from reading what Stephen65 has posted for wage and salary earners the ATO is saying the fees are not deductible and any of the cluses mentioned - s8-1, 25-5 and 25-25.

Be interested in a view on whether an Amex Charge card is viewed differently to an Amex Credit card given there is no possibility of longer term borrowing

 

[cove]

Without giving tax advice ,you would want to put the credit card into credit in some instances.
Amex Kris Flyer thru Westpac allow this but Amex Ultimate do not.
Charging BAS on 21st or 28th of the month should be ok as you can show the flow of the money borrowed on a card going to pay business expenses. You would then pay off the card later so the charges should be ok.
Paying personal taxes.....keep reading the ATO view for your circumstances.

 

[cove]

If you are patient and you are paying taxes every quarter or every month it won't take long to figure that 0.65 cent or 0.83 cent per point can create some super travel bargains regardless of tax deductions.

 

[trippin_the_rift]

If you are patient and you are paying taxes every quarter or every month it won't take long to figure that 0.65 cent or 0.83 cent per point can create some super travel bargains regardless of tax deductions.

It's important to remember that the ATO does not accept cards to help everyone get more points, but rather to help preserve small business cashflow.

 

[pauly7]

It's important to remember that the ATO does not accept cards to help everyone get more points.

No way! They don't?

 

[Stephen65]

I suspect the main reason is to improve the ATO's own receipts. If they can get taxpayers who would otherwise default on their tax to instead pay their tax by CC then the ATO is ahead even if the taxpayer then defaults on his CC.

 

[cove]

Based on the rapidly changing receipt numbers the credit card payment system is increasingly popular.

 

[Bill Gillespie]

Hi, I have been paying my aussie taxes for the past 2 tax years (since Sept. 2009) with their "trial" set-up. If you follow the link from the ATO site to the Reserve Bank of Australia page, you can pay by credit card, including Amex. I have done so. cheers!

 

[Flashback]

Hi, I have been paying my aussie taxes for the past 2 tax years (since Sept. 2009) with their "trial" set-up. If you follow the link from the ATO site to the Reserve Bank of Australia page, you can pay by credit card, including Amex. I have done so. cheers!

Or you can click here -> https://www.optussmartpay.com/governmenteasypay-ato/ :mrgreen:

 

[milonida]

Yes, you can pay tax by credit card but 1.25% surcharge for AMEX and 0.65% for visa/mastercard. The question then becomes is the surcharge good value FF points.

 

[Bill Gillespie]

Hi, well that is everyone's choice. I earn 1.5 FF points per Amex dollar spent in Australia so paying 1.25% of the total spend for 50% extra points on top of 1 per $1 is a no-brainer for me.

 

[Mal]

Yes, you can pay tax by credit card but 1.25% surcharge for AMEX and 0.65% for visa/mastercard. The question then becomes is the surcharge good value FF points.

You can deduct the fee in some circumstances ( Credit card payment fee deductibility guidelines ), but for general taxpayers, these are pretty rare.

 

[AdamR]

I suspect the main reason is to improve the ATO's own receipts. If they can get taxpayers who would otherwise default on their tax to instead pay their tax by CC then the ATO is ahead even if the taxpayer then defaults on his CC.

I have heard of a 'trick' where a person will pay off, say, a HECS debt on a credit card, then default on the card and be made bankrupt. The reason for doing this is that some ATO debts (including HECS) survive bankruptcy, but credit card debts don't. So if you have no assets to lose, and see a benefit in bankruptcy, it makes sense to pay your tax debts by credit card.

 

[Maca44]

I have heard of a 'trick' where a person will pay off, say, a HECS debt on a credit card, then default on the card and be made bankrupt. The reason for doing this is that some ATO debts (including HECS) survive bankruptcy, but credit card debts don't. So if you have no assets to lose, and see a benefit in bankruptcy, it makes sense to pay your tax debts by credit card.

I pay company and BAS tax on Amex, but I think I will pass on your suggestion. Thanks anyway.

 

[cove]

This thread profoundly changed a number of our members lives because we dont all regularly visit the Tax Office web site.
The 0.65% for VISA/MASTERCARD got us scrambling for the point per dollar uncapped cards.
The faster points earning AMEX card at 1.5 points per dollar uncapped for 1.25% can also be attractive.
Now was that a choice of 4 champagnes in the QF FIRST lounge?
Thank you for this thread.It seems like eons ago but it all kicked off 18 months ago.
I figure we have saved 6 figures between the retail value of the flights and the modest cost of the earned points.

 

[Stephen65]

I paid my last BAS on my amex charge card. It almost made me feel good about paying my tax.