ATO warns business owner over loyalty points from cards

[theblank]

Anyone who wants to work hard or succeed in life should consider their options for moving overseas ASAP.

I work hard to succeed too, but I cant push tens or hundreds of thousands dollars a year of someone elses expenses through my personal credit card to rack up points.

Reward points from business expenses *should* be taxed. Its the vibe.

 

[Pushka]

I don't use credit cards to pay ATO etc and haven't for a couple of years. No longer an issue anymore for me. And my freebie points are gained through non employment means.

 

[Nutcase]

I think the ATO would be better off looking into "Real" tax avoidance , which costs the country Billions every year.

Its clear that there is an FBT issue here. The ATO are just doing their job in looking into this.

It's like a police officer pulling you over for speeding. As much as you don't like it at the time, saying to the officer "why don't you go after the real crooks like the drug dealers and the thieves" is an admission of guilt and makes you look petulant because you got caught.

 

[Dr Ralph]

It's like a police officer pulling you over for speeding. As much as you don't like it at the time, saying to the officer "why don't you go after the real crooks like the drug dealers and the thieves" is an admission of guilt and makes you look petulant because you got caught.

I don't believe that this is a valid analogy.

 

[Nutcase]

I don't believe that this is a valid analogy.

Whilst I can understand your position on the issue, it does seem to to hitting a nerve. There's a similar level of angst with regard to the reduction of points earning capacity on cards over the last few weeks. There are a lot of threats being made, cancellations and heightened level of outrage over changes that, in reality cannot be altered.

Interestingly, there is no overt disagreement that many of these reward points do have an FBT component. Quite the contrary in fact.

Much like the issue of points cards, the issue is more about having the benefit either taken away, diluted or changed which brings out the most disagreement. The actual issue of FBT seems to be irrelevant.

 

[JohnK]

Put the OP on your ignore list like I have, makes AFF much more pleasant

I think it's good to have an alternate point of view and some of the information Nutcase has posted in the past has been accurate.

I don't have any interest in this particular topic but I have taken an interest in the changes that have been happening recently regarding reduced credit card earn and as far as I am concerned any changes to reducing credit card points earn may actually put some value back into my hard earned frequent flyer points. Or at least until the airlines start to devalue them again.

 

[fairbasa]

ATO put out these scary press releases every now and then, the same way ASIC do with the banks. Ultimately, it's all bark and no bite.

Even there was a precedent set that it was indeed a fringe benefit, they simply don't have the resources to pursue these matters. Further to this, what is the value of the points? Even accepting your argument that the value is determined upon redemption, what exactly is the value of an award flight/hotel stay? You couldn't possibly say it's the same as a revenue booking due to limited availability and other restrictions which reduce the value.

This doesn't affect me anyway, but even if it did I really wouldn't be stressing.

 

[burmans]

The fringe benefit is not cash - its a non cash benefit but has value. The value is taxed.

If you were given a business class trip to new York for a vacation by your employer, that would be a fringe benefit and taxed.

If points were used to pay for that, and those points were gained through business spend then we have a fringe benefit and a taxable item.

If was you trying to make the suggestion that we should treat fringe benefits the same way as money. I agree it has value, but as you yourself note, we have moved on from "whether" it has value as to "when" it has value.

We had moved on to the topic of when points have value. The proposal was that points have no value until they are redeemed which is the opposite of how money works.

Yes, this is how ATO regard this, its also pretty much an area where case law agrees with their belief.

Of course we can have different beliefs but pretty much irrelevant when we don't hold the cards.

 

[burmans]

The Tax Office seem to the Payne ruling as being specific to the case of the person receiving the benefit being an employee. I don't think the case of Business Owners themselves earning points has been resolved in the courts.

Can I just note that most Business Owners are actually regarded by the Tax Office (and the courts) as also being employees. They still pay income tax on income earnt and FBT on benefits in just the same way as any other employee. Yes, they have a bit more scope to leverage those benefits but not sure that affects how those benefits are treated if earnt. So see no reason this Practice Statement would not apply.

 

[Pushka]

Surely QP membership gained by accumulation of business paid for flights is a classic case for FBT.

 

[theblank]

There are a lot of threats being made, cancellations and heightened level of outrage over changes that, in reality cannot be altered.

and most of these appear to be coming from those who are using personal cards for business expenses and taxes. How else could someone be claiming that these changes and previous redemption values are costing them soooooo much.

Anyone putting 6 figures+ personal expenses through a credit card is likely to be earning way too much money to be concerned about such an insignificant change relatively, and even more unlikely to be wasting time on social media whining.

 

[drron]

and most of these appear to be coming from those who are using personal cards for business expenses and taxes. How else could someone be claiming that these changes and previous redemption values are costing them soooooo much.

Anyone putting 6 figures+ personal expenses through a credit card is likely to be earning way too much money to be concerned about such an insignificant change relatively, and even more unlikely to be wasting time on social media whining.

Sorry but you are wrong.

 

[ermen]

This is the whole point of having them and why the ATO are considering the taxable status of them.

As mentioned, the ATO can consider all they want, and I am sure they would like to get their hands on it. But it just so happened they have seemingly not been successful in the courts before... that is a problem. shock horror.

And they do not seem to have any successful cases prosecuting anyone along this "FBT" lines. Again, I posit that they are on tenuous legal grounds (or we would have seen more prosecutions). Even the TR's threshold is 250,000 points per annum. Why this arbitrary 250,000? It is question of fact, it is either taxable, or not. And a 60,000 SYD-HKG J ticket will be taxable just as much as a 280,000 RTW J trip is.

The ATO can opine what they want, and threaten what they want, but ultimately, if its not legal to tax them, then that is the law.

As an aside just think about it - a salesman has flown 500,000 miles per annum.. and he gets those points.. I'm sure the ATO would like to tax that guy...

Only a lobotomised monkey would be celebrating this news. The ATO trying to tax points is yet another example of the hideous socialist disease which is destroying Australia.

Anyone who wants to work hard or succeed in life should consider their options for moving overseas ASAP.

Funny you say that. I was just thinking the same thing. Whilst I appreciate the rule of law that exists in Australia (like the residential tenancy act, consumer protections), it is sometimes too much of a nanny state (with a hinge of tall poppy syndrome I think).

Reminds me of these stories:

1. Back in the day, I used to churn credit card points via the ATO. I just overpayed my income tax account and asked for a refund of the excess amount (by the way you can do this). Did it a few times (churned a few hundred thousand lol), and then some guy from the ATO called up and asked what I was doing. Told him exactly what I was doing (for points) and he told me I could only do it that once and not to do it again. Then I did it again, and he ended up reversing the transaction back to my credit card. See I don't know why he had to interfere. From my perspective, I was not breaking any laws, and I was using perfectly legitimate means, within the rules, that the ATO had set up to achieve my aims. ATO was not making a loss. But no, an overzealous bureaucrat had to interfere, for no apparent (and legal) reason. In fact, I think his method of refund, was not within the rules of the ATO at the time (i.e. only bank transfer or cheque allowed and not credit card)

2. Or I was recently selling discounted wish gift cards on ozbargain at a good discount with many happy customers. Then the mods decide to shut it down because the "classified ad system was not designed for such a thing". Stupid decision really.

 

[lovetravellingoz]

and most of these appear to be coming from those who are using personal cards for business expenses and taxes. .

Good theory bro. But I have only ever received a tiny fraction of my points from that.

Hell, I have only ever received a small amount of points from business cards earning points too.

 

[Caversham04]

I think the ATO would be better off looking into "Real" tax avoidance , which costs the country Billions every year.

At the risk of sounding pedantic, I would argue that you mean tax EVASION.

Tax avoidance is using legal means to minimise the tax that is payable
Tax evasion is failing to pay tax that is legally due

Politicians are increasingly and deliberately confusing the two.......

 

[burmans]

Politicians are increasingly and deliberately confusing the two.......

Not only politicians going by some comments here.

 

[Caversham04]

Not only politicians going by some comments here.

I was giving the benefit of the doubt

 

[Nutcase]

I just overpayed my income tax account and asked for a refund of the excess amount (by the way you can do this). Did it a few times (churned a few hundred thousand lol), and then some guy from the ATO called up and asked what I was doing. Told him exactly what I was doing (for points) and he told me I could only do it that once and not to do it again. Then I did it again, and he ended up reversing the transaction back to my credit card. See I don't know why he had to interfere. From my perspective, I was not breaking any laws, and I was using perfectly legitimate means, within the rules, that the ATO had set up to achieve my aims. ATO was not making a loss. But no, an overzealous bureaucrat had to interfere, for no apparent (and legal) reason. In fact, I think his method of refund, was not within the rules of the ATO at the time (i.e. only bank transfer or cheque allowed and not credit card)

High dollar levels and volumes of card refunds are a red flag for the acquiring Bank. Refunds are a risk for the bank and for the ATO. Its also a red flag for fraud which is actually what you were doing with the ATO.

If you are going to do this sort of thing, it may be a better idea to choose merchants who are not government bodies especially the ATO.

Whilst Im sure that you think that this is all OK and doing no harm, getting the ATO to refund you in a different method to how you paid is a breach for them of their agreement with the Bank and their merchant agreement.

Count yourself lucky that all you got was a phone call.

2. Or I was recently selling discounted wish gift cards on ozbargain at a good discount with many happy customers. Then the mods decide to shut it down because the "classified ad system was not designed for such a thing". Stupid decision really.

I give you an A+ for ingenuity for both of these creative methods of obtaining points however this is also fraud my friend.

 

[Solid]

High dollar levels and volumes of card refunds are a red flag for the acquiring Bank. Refunds are a risk for the bank and for the ATO. Its also a red flag for fraud which is actually what you were doing with the ATO.





I give you an A+ for ingenuity for both of these creative methods of obtaining points however this is also fraud my friend.
[/FONT]

I'm struggling to see how what the OP was doing classifies as fraud considering fraud requires an element of dishonesty.

Should raise some money laundering concerns though.

 

[Pushka]

I'm struggling to see how what the OP was doing classifies as fraud considering fraud requires an element of dishonesty.

Should raise some money laundering concerns though.

Could be construed as dishonesty when by virtue of the BAS lodgement you are advised exactly how much you owe the ATO.