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Did you want to earn points while paying the Australian Tax Office? Compare some of your options.
If you have a points-earning credit card, it is possible to earn rewards and frequent flyer points when you pay your ATO bill, whether it’s for personal or business income tax, PAYG, BAS payments or a HECS debt. There are three ways to make the credit card payment online:
The ATO website offers a service known as EasyPay, which allows you to pay your tax bill using a credit card. This option is available to every kind of taxpayer, including incorporated businesses.
To pay your tax bill with EasyPay, you need to provide either your EFT (electronic funds transfer) code or your PRN (payment reference number) and your credit card details. The minimum payment amount is $10 and the maximum $20 million. (Congratulations are in order if you have a credit card with a limit which will accommodate the maximum amount).
Individuals and sole traders can also access the ATO’s payment options (including credit card payments) by logging in to their MyGov account and clicking on the ATO option in the ‘My linked services’ section.
To pay through the MyGov/ATO portal you will need to select the tax account to which the payment is to be directed (e.g. Income Tax, or Activity Statement) and then enter the credit card details and payment amount.
RewardPay is a business-to-business payment service which facilitates the earning of credit card points when paying business expenses. Both the payer and the payee need to have an ABN, so it can be used by sole traders and small businesses when paying the ATO. RewardPay’s revenue source is the 2.4% (+ GST) surcharge it makes on all transactions.
Points to bear in mind when using a credit card to pay the ATO
Since your payments to the ATO are unavoidable, it makes sense to derive some benefit from them by paying with a points-earning card that allows points to be earned on ATO transactions. But be aware that many rewards cards specifically exclude ATO payments from earning points. Those that do not exclude them may still have a tiered points table which places ATO payments at the bottom of the pile with the lowest earning rate per dollar spent.
All cards appearing on this page currently allow points to be earned on ATO payments, at varying rates per dollar, but terms and conditions can change quickly and it is possible that a different situation may apply in the future.
No. Many rewards cards specifically exclude ATO payments, so the points earned on ATO payments will be zero.
Most unlikely. The cards that permit points to be earned on ATO payments usually allocate a lower earning rate to any transactions with government bodies.
Until relatively recently, ATO payments attracted much the same points earning rate as other transactions. Banks were slow to recognise that ATO payments were among the largest payments an individual or business was likely to make where a credit card was accepted and could be used without any significant penalty (such as reduced ability to negotiate a favourable price, which might happen with a car purchase). This would most certainly have been eroding the banks’ overall profit on credit card transactions. Rather than apply more restrictive points caps (which would reduce a card’s general appeal) they decided to target ATO payments by either offering a lower earning rate or excluding them altogether.
Payments can be made through EasyPay (via the ATO website), through an individual taxpayer’s MyGov account, or through rewards credit card payment service Rewardpay.com.au. Surcharges are levied on all these payments.
The ATO also levies a surcharge for making payments through EasyPay or MyGov using a credit card. Currently these charges are 0.54% for Visa and MasterCard and 1.45% for using American Express. The ATO says that these charges are identical to the charges made by its own bank for processing the transactions, so the ATO is not making a profit on transactions.
The ATO credit card surcharge is tax deductible for businesses (so this should include Activity Statement payments for anyone with an ABN) but not for an individual’s income tax payments.
Assuming that you are satisfied with the rewards points return you are getting on normal transactions when offset against your card’s annual fee and any other benefits, the additional cost of ATO rewards points lies in the surcharge levied on card payments by the ATO or RewardPay.com.au. The surcharge rates are 0.54% for Visa and MasterCard and 1.45% for AmEx if paying directly through EasyPay or MyGov. Payments through RewardPay.com.au attract a surcharge of 2.4% for any kind of card.
So the question you need to ask yourself is whether the cost per ATO reward point exceeds the value of an ATO reward point?
In fact, the value to you of any reward point depends not on the type of payment you are making, but the type of redemption you choose. Long haul flights usually offer the best value redemptions, while retail gift cards are amongst the most popular.
A Qantas economy return flight to the UK, if booked well ahead, costs around $1,870 for a base fare (i.e. excluding taxes) or 120,000 Qantas Frequent Flyer points. This puts a value of about 1.5 cents on each QFF point.
A $100 retail gift card costs 13,500 American Express Membership Rewards points, valuing each point at around 0.75 cents.
So Qantas points need to cost less than 1.5 cents each in surcharges to be worthwhile, and AmEx Membership Rewards points need to cost less than 0.75 cents, before the cost exceeds the value.
This means that, if you are paying directly through the ATO, a Visa/MasterCard needs to be earning points for ATO payments at the rate of more than 0.36 points per dollar (if redeemed for long haul Qantas flights) and more than 0.72 points per dollar (if used for retail gift cards). An AmEx card needs to be earning at the rate 0.97 points per dollar (for flight redemptions) or 1.9 points per dollar (for gift card redemptions). Payments through RewardPay need earning rates of 1.6 points per dollar (flight redemption) or 3.2 points per dollar (gift card redemption).
In a nutshell, if your Visa/MasterCard earns at least 0.5 points per dollar for ATO payments, or your AmEx card earns at least 1 point per dollar, and you intend to redeem the points for long haul flights, go ahead and pay the ATO by AmEx card through EasyPay or MyGov because you will be on the winning side of the cost/benefit calculation. But it’s not worthwhile if you intend to redeem points for gift cards, and payments through RewardPay will only be beneficial if your card earns 2 points per dollar or more for ATO payments.