Credit card rewards and tax
Who doesn’t love something for nothing?! Well, welcome to the world of reward credit cards, your ticket to receiving freebies for spending money. There are so many types of reward programs from frequent flyer, cashback, travel and shopping rewards just to name a few. So each time you spend money on your rewards credit card you earn points. These points can be redeemed for a huge range of products from flights to toasters to a new pair of jeans. The rewards are endless! Now, is the taxman going to come after you for these rewards and benefits you receive? Or is there a positive spin on credit card rewards and tax? Read this guide to learn the ins and outs on tax and credit card rewards.
Looking for your next card? Compare some of our top cards here.
Rewards Credit Card Comparison Table - last updated November 29, 2020
American Express Qantas Discovery Card
American Express Qantas Discovery CardDetails
Qantas Money Qantas Premier Platinum
Qantas Money Qantas Premier PlatinumDetails
Bankwest Qantas Platinum Mastercard
Bankwest Qantas Platinum MastercardDetails
St.George Amplify Platinum
St.George Amplify PlatinumDetails
Suncorp Clear Options Platinum
Suncorp Clear Options PlatinumDetails
Are credit card rewards considered taxable income?
Reward credit cards are a common way for both businesses and individuals to spend money. As hundreds if not thousands of points are racked up on their rewards credit cards what happens at the end of the financial year? The good news is, these points remain tax free for now! However, the Australian Tax Office may change this in the foreseeable future, to prevent fraud as people are opening fake accounts in order to earn thousands of reward points. When it comes to redeeming the points for rewards the situation is a little different in relation to tax. Depending on if the reward is personal or business related will determine if tax is applicable:
The general principle is that personal rewards received from loyalty programs, including flight rewards and cashback are not considered taxable income.
When it comes to businesses and employees receiving rewards from credit card loyalty programs it gets a little complicated. It depends on several factors as to whether or not the reward is taxable. If the employee receives a reward such as a flight in lieu of a salary than it may be subject to income tax or fringe benefit tax. We suggest checking out the ATO’s website on taxing consumer loyalty program rewards.
We know that choosing a rewards card isn’t easy given there’s so many options, that’s why Mozo developed the Rewards Revealer Tool. Plug in your annual spend to find a ranking of rewards cards based on your spending level and rewards you're interested in.
Can you earn credit card reward points when you pay your TAX?
Earning credit card reward points is pretty easy! Every time you make a purchase, be it shopping for groceries, paying for petrol or booking a flight you can use your rewards credit card to accrue points. Now we have another way for you to earn points that you may never have thought possible…paying your TAX. While you may dread tax time, turn it into a positive, as a chance to earn reward points towards that much needed flight to Melbourne!
The Australian Tax Office actually states on its website that it would rather taxpayers pay their bill using a credit card. So there’s an opening to use your rewards credit card and earn points towards your loyalty program. There’s an online payment system on the ATO website that processes credit card transactions as a purchase. But be aware, the ATO does charge a surcharge for using your credit card to pay your tax bill. So do the maths and see if the points earned are worth more than what you’ll pay in surcharge.
Check out Mozo’s guide on avoiding credit card fees.
Which banks allow you to earn reward points when paying your TAX bill?
Not all banks and financial institutions will allow you to accrue reward points when you pay your tax bill by credit card. As it’s an easy way for businesses and individuals to earn lots of points, a lot of banks have abolished or changed the point earnings rate when making payments to the ATO. For example:
- Commonwealth Bank: From November this year the CBA has put a halt on earning frequent flyer points when making payment to the Australian Taxation Office. So if you have a personal credit card with the Commonwealth bank including – standard, Gold, Platinum and Diamond Awards you won’t earn any points towards you rewards program. However, CBA Business Awards customers will continue to receive points when making payments with the ATO.
- Westpac: In November 2014 Westpac halved the number of points awarded on American Express with bills paid to the ATO. They even went further as to axe all points earned on Visa and MasterCards with ATO payments.
- NAB: If you’re a NAB customer with a rewards credit card you won’t accrue any points when paying the ATO! In May 2015 the NAB put an end to all credit card points earning with the ATO.
It’s important to check with your card provider before assuming you’ll earn reward points come TAX time.
^See information about the Mozo Experts Choice Rewards Credit Cards Awards
Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.
While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.