Phone call from Citibank re: business expenditure on select card.

[burmans]

Pits purely statistic driven analysis - opinion has a little play here.
No one is saying full time employment gives you a job for life. But an employee would be likely to have a better chance to earn something compared to ordinary business owners. E.g getting a job vs setting up a new business. Furthermore, a company is unlikely to cut staff by 50 or more %.

But most businesses go down hill within first 5 years of operation and business (limited company)'s liability is limited and unsecured debt get paid the last (if any). This makes business debt a little less favorable compared to personal debt.

Im not saying your opinion is wrong, I'm just saying that banks prefer stats & calculated risk, regardless whether it's right or wrong ;-)

The issue with the CDO was indeed that they got it wrong, to eastwest101 you are surely not saying that because they got their risk assessment wrong in one case they should just ignore risk from now on! I would suggest the opposite they should learn off their mistakes as a way to try and get it right.

Regardless of what anyone believes, banks like any other business are perfectly entitled to make their own assessments of risk, they are under no obligation to lend to anyone. Indeed under Responsible Lending laws they are required to assess the risks for consumer lending.

In this regards they do rely heavily on statistics, this is because those statistics have proven more effective than indivuduals in assessing risks. On the small business vs. individuals question, well actually the likelihood of failure of SBE's in first few years IS very high so I for one don't think it is inappropriate to apply different rules but frankly it's the banks risk not mine and hence I agree they have the right to assess it, my opinion is meaningless.

On the ATO question though, how do they KNOW this expenditure is personal or business, the website is the same and individuals do pay tax too! The simple answer is they don't unless people alert them!

 

[Deleted member]

Pits purely statistic driven analysis - opinion has a little play here.
No one is saying full time employment gives you a job for life. But an employee would be likely to have a better chance to earn something compared to ordinary business owners. E.g getting a job vs setting up a new business. Furthermore, a company is unlikely to cut staff by 50 or more %.

But most businesses go down hill within first 5 years of operation and business (limited company)'s liability is limited and unsecured debt get paid the last (if any). This makes business debt a little less favorable compared to personal debt.

Im not saying your opinion is wrong, I'm just saying that banks prefer stats & calculated risk, regardless whether it's right or wrong ;-)

Actually I read somewhere that the failure rate of business is no where near as high as thought. Too many labour only contractors skewing the figures by moving to wages vs being on contract. By volume there are huge numbers of bankruptcies from young people with phone bills they can't afford.
People don't stay in jobs for life anymore either. Hence my 30 years in the same biz translates to a proven record of stability. My point was about my specific circumstances. So with string asset backing , 30 years in biz, strategic succession plan and good income , it's still easier to give a newbie a credit card or large car loan. But I did read a comment by Paul Clitheroe ( I think it was him) where the banks had worked out the failure rate of low deposit home loans and factored this in to their bottom line as acceptable risk. T

 

[markis10]

Actually I read somewhere that the failure rate of business is no where near as high as thought. Too many labour only contractors skewing the figures by moving to wages vs being on contract. By volume there are huge numbers of bankruptcies from young people with phone bills they can't afford.

The numbers dont support that, ie Business Failures by employee size:

Business failures have actually been growing yearly by 30%, coming close to 12000 for the last year ASIC published figures for companies, which does not include sole traders /partnerships operating under schema outside of the corporations one. Bankruptcies of individuals by comparison are only twice the business figure, coming in at 22000 yearly according to the ITSA figures up until June 2012.

The trend with individuals is not with the young: "The age of bankrupts has consistently increased since 2003, with the proportion of bankrupts aged 18 to 39 declining and those aged 40 and over increasing", under thirties account for 14% of the figures, so thats 3080 in total. Of those 3080 22% blame excessive use of credit, if we say that 50% of them would be telco, that means 350 odd young people.

Source - latest ITSA Debtor profiles http://www.itsa.gov.au/dir228/itsaweb.nsf/docindex/statistics+&+research->debtor+profiles

 

[eastwest101]

The issue with the CDO was indeed that they got it wrong, to eastwest101 you are surely not saying that because they got their risk assessment wrong in one case they should just ignore risk from now on! I would suggest the opposite they should learn off their mistakes as a way to try and get it right.

I agree completely - I would prefer them to get it right as well - my point was more along the lines that when financial institutions get it wrong it is usually the customer or the merchant whom gets punished first, if they can't do that then they go cap in hand to the "good 'ol taxpayer". Funnily enough - its often not the case that the board/management or the shareholders who end up suffering....

Regardless of what anyone believes, banks like any other business are perfectly entitled to make their own assessments of risk, they are under no obligation to lend to anyone. Indeed under Responsible Lending laws they are required to assess the risks for consumer lending.

And obey the law - consumer law in particular. Others have raised the contestibility of some of the T&C's and their interpretation of...

In this regards they do rely heavily on statistics, this is because those statistics have proven more effective than indivuduals in assessing risks. On the small business vs. individuals question, well actually the likelihood of failure of SBE's in first few years IS very high so I for one don't think it is inappropriate to apply different rules but frankly it's the banks risk not mine and hence I agree they have the right to assess it, my opinion is meaningless.

Yes I agree - but with the caveat that you properly use and understand statistics and exercise proper judgement.

A good example of this is the post by markis10 that could possibly be mis-interpreted that businesses with 1-5 employees are 500 times more likely to go broke than businesses whom have 500+ employees. Of course we also know that there are a lot more businesses with 1-5 employees in Australia than there are businesses with 500+ employees.

Another example would be that if you ran the statistics in 2006 about if SCDO's were a great investment - then you would confidently say that the statistics support you investing in SCDO's. If you were silly enough to have done this, without any other references to common sense/diversification/past performance is no garantee of future performance etc etc you would look pretty silly by now.

I am not having a go at markis10 at all - the statistics presented by markis10 are always interesting, and I wasn't aware of the demographic analysis of individual bankruptcies - so thanks for that.

On the ATO question though, how do they KNOW this expenditure is personal or business, the website is the same and individuals do pay tax too! The simple answer is they don't unless people alert them!

Absolutely correct - their T&C's - their burden to prove it. And exactly right I agree with you.

 

[markis10]

I am not having a go at markis10 at all - the statistics presented by markis10 are always interesting, and I wasn't aware of the demographic analysis of individual bankruptcies - so thanks for that.

On could also argue that it only takes one big developer to go bust and that takes down a lot of contractors, ie Raptis.

Absolutely correct - their T&C's - their burden to prove it. And exactly right I agree with you.

The ATO is obligated to report back what type of account is being paid to the merchant I believe, its part of the documentation requirements that allow credit card statements to be used as receipts.

 

[R36snowbound]

I just don't understand why some people have to be bitter and try and spoil things for others!! :evil:

An as an aside, it's quite clear that you cannot put bus expenses through on your card - you are simply not complying with the Ts & Cs - you have no right to complain.

Unlike your current approach, ATO payments are not in clear breach of the Ts&Cs - there is plenty of room for debate about whether or not they constitute a tax (as intended by the Ts&CS).

You seem to be upset about being caught - not about being accused of doing something which you should otherwise be able to do. I just don't understand why you try to justify breaching your contractual terms on the basis that others seem to be able to get extra points when you cannot.

I'm sorry if this is harsh, but this just happens too often, and really annoys me.

DTM1,

Thanks for your frank assessment.

If you have an average spend of $20,000 per month and they know how much you earn based on the employment check and copies of payslips that you supplied when applying for the card, then where does simple maths come into this?

$20,000 per month spend, $240,000 per year. Based on current tax rates, you would have to be on close to $500,000 per year and pump ALL your income through the card.......

I don't think that they cared previously, they have enjoyed my custom as a Citibank customer since 2010 and it has never been an issue, plus my spending pattern has not dramatically changed.

Plenty of other credit card options out there...

 

[eastwest101]

The ATO is obligated to report back what type of account is being paid to the merchant I believe, its part of the documentation requirements that allow credit card statements to be used as receipts.

Thanks - I didn't realize that. I would be interested to hear how that obligation sits with this: (From the ATO Taxpayers Charter)


Disclosing your information

We will not disclose your information to any person or organisation unless we are authorised under the laws we administer.
The most common reasons for disclosing your information are to check your eligibility for government benefits and for law enforcement reasons.
Other organisations can only use the information for the purpose for which it was disclosed to them. The information continues to be covered by the Privacy Act and the secrecy provisions in the tax laws.

Generally, the laws set out who we can disclose information collected under the law to, and for what purpose.

Last Modified: Friday, 21 December 2012

 

[markis10]

Thanks - I didn't realize that. I would be interested to hear how that obligation sits with this:
Disclosing your information

We will not disclose your information to any person or organisation unless we are authorised under the laws we administer.
The most common reasons for disclosing your information are to check your eligibility for government benefits and for law enforcement reasons.
Other organisations can only use the information for the purpose for which it was disclosed to them. The information continues to be covered by the Privacy Act and the secrecy provisions in the tax laws.
Generally, the laws set out who we can disclose information collected under the law to, and for what purpose.
Last Modified: Friday, 21 December 2012

Same privacy provisions cover major businesses who also provide a breakdown of what the credit card expense is, in this case its the ATO complying with their own laws I suspect.

http://law.ato.gov.au/atolaw/view.htm?docid=ITR/IT2482/NAT/ATO/00001

 

[burmans]

The ATO is obligated to report back what type of account is being paid to the merchant I believe, its part of the documentation requirements that allow credit card statements to be used as receipts.

Hmm, not sure about this one, the info the ATO tells Amex is to support production of the recipt to me and is the legal reason that ATO can share money with Amex. Fien so far but the view states

documentary evidence of an expense other than depreciation is a receipt, invoice or similar document - obtained by or on behalf of the taxpayer at the time the expense was incurred or as soon as reasonably practicable thereafter - that contains the following information :

. the date the expense was incurred;
. the name of the person who supplied the relevant goods or services, or if supplied by a person conducting a business, the name of that person or the business name of that business;
. the amount of the expense expressed in the currency in which it was incurred;
. the nature of the goods or services; and
. the date of the document.

​

But I can't remember anything on the receipt which says this is a personal or a business account being paid and if not then ATO can't really give the complying with the law argument as it's clearly not related to production of the receipt.

 

[markis10]

Hmm, not sure about this one, the info the ATO tells Amex is to support production of the recipt to me and is the legal reason that ATO can share money with Amex. Fien so far but the view states

documentary evidence of an expense other than depreciation is a receipt, invoice or similar document - obtained by or on behalf of the taxpayer at the time the expense was incurred or as soon as reasonably practicable thereafter - that contains the following information :

. the date the expense was incurred;
. the name of the person who supplied the relevant goods or services, or if supplied by a person conducting a business, the name of that person or the business name of that business;
. the amount of the expense expressed in the currency in which it was incurred;
. the nature of the goods or services; and
. the date of the document.

​

But I can't remember anything on the receipt which says this is a personal or a business account being paid and if not then ATO can't really give the complying with the law argument as it's clearly not related to production of the receipt.

It falls under the nature of goods and service, ie remittance personal account, remittance business account. Our household has an ATO senior staffer .

 

[d00dz]

Wonder if this is why they have discontinued the citibusiness gold card?

I still have mine, hopefully Ill get a new one soon as mine expires in March 2013.

 

[Deleted member]

The numbers dont support that, ie Business Failures by employee size:

Business failures have actually been growing yearly by 30%, coming close to 12000 for the last year ASIC published figures for companies, which does not include sole traders /partnerships operating .........

I wasn't making specific statistical references. I must admit however that a number ( and I suspect it's more than we know) of individuals will wind up their company. Not pay their debts. And start a new company the next day. I have seen it many times myself and I think it's despicable.

 

[markis10]

The numbers dont support that, ie Business Failures by employee size:

Business failures have actually been growing yearly by 30%, coming close to 12000 for the last year ASIC published figures for companies, which does not include sole traders /partnerships operating .........

I wasn't making specific statistical references. I must admit however that a number ( and I suspect it's more than we know) of individuals will wind up their company. Not pay their debts. And start a new company the next day. I have seen it many times myself and I think it's despicable.

Phoenix companies are problematic, the reference to business failures was to provide an overview of failures re the assertion they are mostly contractors going bust, which is clearly not the case when businesses with 6-19 employees represent a similar number of liquidations.

 

[sumthinfornuthin]

All the more reason to have multiple master cards or visa to spread it out and simply accept the cost of the cards
if you can put enough dollars through it is worth it especially at 1:1

When talking to credit card companies just remember what Sergeant Schultz from Hogans Heros said all the time"

I know nothing !

 

[yohy?!]

i think the main fear of these CC companies is that you may be buying inventory for your business that is readily convertible to cash (ie you go bust and flog off your inventory and keep the profits leaving them to write-off the debts once the company folds).

 

[albyd]

I don't know if I'm missing something here. I think if the ATO is paying less than 0.5% merchant fee on Mc & visa and points are worth 1.1% for cash back and much more as FF points (spending on the CC you're using), then it's a losing proposition for them in a big way. It's just the reverse of why it's attractive to consumers to pay by credit due to points value vs merchant fee?

 

[Deleted member]

Pits purely statistic driven analysis - opinion has a little play here.
No one is saying full time employment gives you a job for life. But an employee would be likely to have a better chance to earn something compared to ordinary business owners. E.g getting a job vs setting up a new business. Furthermore, a company is unlikely to cut staff by 50 or more %.

But most businesses go down hill within first 5 years of operation and business (limited company)'s liability is limited and unsecured debt get paid the last (if any). This makes business debt a little less favorable compared to personal debt.

Im not saying your opinion is wrong, I'm just saying that banks prefer stats & calculated risk, regardless whether it's right or wrong ;-)

Fair point, however statistics are an overall guide. When anyone makes application for credit , they Are ( or at least should be) assessed on their merits.
So 30 years of success in business IMHO should account for something , but it would seem not

 

[Deleted member]

i think the main fear of these CC companies is that you may be buying inventory for your business that is readily convertible to cash (ie you go bust and flog off your inventory and keep the profits leaving them to write-off the debts once the company folds).

If you are referring to using personal cc's for business, the debt is personal , so winding up the company and keeping the cash won't work, because the bank will come after the individual not the company anyway.

 

[deka2]

What risk is it to the CC Company if you pre load the CC with an amount equal to the taxes paid.

I have to do this for large payments as I don't have the limit to cover them.

 

[Deleted member]

What risk is it to the CC Company if you pre load the CC with an amount equal to the taxes paid.

I have to do this for large payments as I don't have the limit to cover them.

My point exactly. I am unsure just what the problem is. Surely lots of transactions and fees to CC company is a good thing? Let's face it Coles and Woolies won't beacon large merchant fees and the volume would I assume be enormous. So what of I buy $500 worth of toilet paper , cleaning goods and the like from Woolies and use them in MySpace of business