ATO warns business owner over loyalty points from cards

[lovetravellingoz]

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)

Far be it for me to defend the ATO, however from a business perspective:

1/ Why should the ATO (and in turn the public) with no benefit to the ATO tie up time and resources just so you can make points?

2/ No sane business refunds credit card payments to other than the original credit card. Apart from point-chasers, there are way too many fraudsters to do anything but, and banks will leave you high and dry if you are silly enough to do it with a fraudster.

I know in my business I have gone for high level of authentication for credit card transactions as without it there was a constant stream of fraudsters making transactions with stolen cards and wanting refunds to other cards/accounts. With high authentication it is now zero.

 

[Nutcase]

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.

It doesn't get much more dishonest than deliberately overpaying tax on a credit card with the express intention of getting a "cash/non card" refund just so that you can obtain points.

If the refund was done on the card it would negate the points and therefore the whole scheme would fall over. This is straight up fraudulent behaviour.

The ATO is probably the worst agency to attempt this with.

 

[Pushka]

Although one can argue that the pro rata method of tax collection after a profitable year is also unethical and if overpaid will be paid back.

 

[Nutcase]

Although one can argue that the pro rata method of tax collection after a profitable year is also unethical and if overpaid will be paid back.

Agreed, however that is a bona fide payment request.

The pre pay example here is far from bona fide. The express intention is to extract points for a non required transaction and receive a refund through another channel.

 

[Pushka]

Agreed, however that is a bona fide payment request.

The pre pay example here is far from bona fide. The express intention is to extract points for a non required transaction and receive a refund through another channel.

And the ATO do this as their means of taxing when no profit might actually exist based on assumptions. So if caught by this in the past perhaps you can logic an out if questioned?

 

[Maca44]

Ensure your company/business does not pay your annual subscription to your FF program, (meaning it is not claimed by the company/business as a tax deduction) and ensure that you pay ff part personally.
Think about it

 

[Nutcase]

And the ATO do this as their means of taxing when no profit might actually exist based on assumptions. So if caught by this in the past perhaps you can logic an out if questioned?

Apples and oranges here.

The question of the ATO's request for a legitimate tax payment VS a voluntary payment made by card with the express intent of obtaining a benefit and then having the payment refunded via a different channel.

The first one is legal and required by the ATO, the second is voluntary and fraudulent and uses the ATO to obtain a fraudulent benefit.

No similarity what so ever.

 

[Nutcase]

Ensure your company/business does not pay your annual subscription to your FF program, (meaning it is not claimed by the company/business as a tax deduction) and ensure that you pay ff part personally.
Think about it

Its the points and how they are obtained and then spent, not the membership of the club that is in question.

There are no annual fees for FF membership.

If this was a fee for the QF lounge which is used for business travel then that would be deductible.

 

[ermen]

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

No BAS statement there. Remember this was on the income tax account. I just paid it into my account using the credit card (with the associated fee which is a cost claw back mechanism. so there is no nett loss to the ATO). And once the account was in credit, it was well within my rights to request a refund (which they normally process as a bank transfer or cheque). So they are not making a $ loss on this.

Far be it for me to defend the ATO, however from a business perspective:
1/ Why should the ATO (and in turn the public) with no benefit to the ATO tie up time and resources just so you can make points?

Sure - i hear your arguments from a public policy perspective. As a mitigant, everything is done online so the cost/time is low. But from a theoretical experience - sure I don't disagree.

2/ No sane business refunds credit card payments to other than the original credit card. Apart from point-chasers, there are way too many fraudsters to do anything but, and banks will leave you high and dry if you are silly enough to do it with a fraudster.

The facts here are different. Recall the ATO had a fee of c.50bps which was what they were charged by the credit card company. So putting money into one account then drawing it out another way was a zero loss transaction for the ATO from a CF perspective. In fact, the ATO mandated that all refunds had to be done via EFT or Cheque.
Think of it like a bank account... you put money in and you drew excess out. Bank doesn't mandate that you withdraw monies via the same method it goes in.

And btw, nobody in their right mind will dare to defraud the ATO (i.e. paying in fraudulently using a stolen card and then withdrawing it out another way). They would have too much powers to easily catch you.

 

[ermen]

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.

It is irrelevant what the agreement is between the ATO and their merchant. I am not a party to it, and am not bound by it.

 

[Solid]

It doesn't get much more dishonest than deliberately overpaying tax on a credit card with the express intention of getting a "cash/non card" refund just so that you can obtain points.

How is the transaction dishonest?

 

[ermen]

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.

I am not afraid of the ATO. My tax affairs are squeaky clean and all in order. I file, declared CGT, paid taxes, claimed charitable deductions and file and pay properly. Not worried about them at all.

 

[ermen]

Its also a red flag for fraud which is actually what you were doing with the ATO.


both of these creative methods of obtaining points however this is also fraud my friend.

It doesn't get much more dishonest than deliberately overpaying tax on a credit card with the express intention of getting a "cash/non card" refund just so that you can obtain points.

If the refund was done on the card it would negate the points and therefore the whole scheme would fall over. This is straight up fraudulent behaviour.

The ATO is probably the worst agency to attempt this with.

Apples and oranges here.

The question of the ATO's request for a legitimate tax payment VS a voluntary payment made by card with the express intent of obtaining a benefit and then having the payment refunded via a different channel.

The first one is legal and required by the ATO, the second is voluntary and fraudulent and uses the ATO to obtain a fraudulent benefit.

No similarity what so ever.

So you have called me engaging in fraudulent behaviour, and implying criminal behaviour in three different posts.

It is now time for you to prove the fraud or retract your statement and issuing an apology.

If I sue you for defamation, I posit that I will have a very good chance of winning.

 

[ermen]

How is the transaction dishonest?

No dishonesty here.

In fact, I acted with the utmost honesty and integrity - when the ATO called up and asked what I was doing - I told them explicitly it was to churn credit card points. No obfuscating the facts. And they told me not to do it again.

Zero misrepresentations, either in writing or verbal over the phone.

 

[Nutcase]

So you have called me engaging in fraudulent behaviour, and implying criminal behaviour in three different posts.

It is now time for you to prove the fraud or retract your statement and issuing an apology.

If I sue you for defamation, I posit that I will have a very good chance of winning.

Correct, I have called out that the behaviour as fraudulent.

The proof is clear and I have made the point on multiple occasions in previous posts. The transaction was not bona fide.

The express intent (and this was told to the ATO) was to make a payment on a points earning credit card and seek a refund via a different channel in order to secure points that you were not entitled to thus exploiting a loophole in the ATO's processes around refunds. For whatever reason, the ATO does not do credit card refunds, only EFT or cheque. This is not an excuse to exploit the loophole for personal gain.

By all means, sue me for defamation.

The amount of justification, defensiveness and demands for apologies indicates to me that that this was not above board

 

[Nutcase]

No dishonesty here.

In fact, I acted with the utmost honesty and integrity - when the ATO called up and asked what I was doing - I told them explicitly it was to churn credit card points. No obfuscating the facts. And they told me not to do it again.

Zero misrepresentations, either in writing or verbal over the phone.

Admitting to what you have done, doesn't absolve the underlying dishonesty and make the situation right.

You got caught and admitted it - and then did it again.

 

[CJEMNMAC]

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.

Are you suggesting that points from business expenses should be taxed because you cant push tens or hundreds of thousands of dollars a year through a credit card ? I would think you have the same opportunity as the next person to start any business, build the business and push expenses through a credit card to obtain points. I am just asking if your statement is based from that position ?

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.

Wondering about this part of your comment ( my bold ). Genuine question here... as you have promoted FBT facts and seem to know. Does the FBT Act currently classify points earnt from business expenses through cards and redeemed for personal items as something that is definitely subject to FBT ? Are there examples of business actually declaring these values and paying FBT ?

 

[Nutcase]

It is irrelevant what the agreement is between the ATO and their merchant. I am not a party to it, and am not bound by it.

You are a cardholder using a merchant facility. You are a party to it.

You also admitted that you found a loophole and exploited it fraudulently on several occasions.

 

[Steady]

You are a cardholder using a merchant facility. You are a party to it.

You also admitted that you found a loophole and exploited it fraudulently on several occasions.

A loophole?

 

[ermen]

Correct, I have called out that the behaviour as fraudulent.

The proof is clear and I have made the point on multiple occasions in previous posts. The transaction was not bona fide.

The express intent (and this was told to the ATO) was to make a payment on a points earning credit card and seek a refund via a different channel in order to secure points that you were not entitled to thus exploiting a loophole in the ATO's processes around refunds. For whatever reason, the ATO does not do credit card refunds, only EFT or cheque. This is not an excuse to exploit the loophole for personal gain.

By all means, sue me for defamation.

The amount of justification, defensiveness and demands for apologies indicates to me that that this was not above board

I will.
If you would send the mods your personal details (and they will contact me), it will make it easier for me to serve papers on you.

Edit: why don't you send me your details directly and stop hiding behind your internet mask? It will save the cost of getting court orders for AFF and your ISP.