Australia: Tax Official Going After Loyalty Programs

Australia: Tax Official Going After Loyalty Programs

Business executives who use credit cards to collect large amounts of frequent flyer points will be subject to special tax inquiries, according to the Sydney Morning Herald.

Tax Commissioner Michael Carmody said that the Australian Tax Office would investigate members who collect more than 250,000 points per year.

Carmody insisted that income tax should be paid where frequent flyer points are “assessable income,” forming part of an employee’s overall compensation.

The ATO is advising their tax auditors to look for “contrived and artificial” arrangements where cardholders raise their point level by charging every expense to their loyalty program card.

The acting president of the National Tax and Accountants’ Association, Robert Warnock, told the Sydney Sun-Herald that the guidelines would be of “great concern” to businesses.

“It sends a message that the ATO is going to attack this practice,” Warnock told the newspaper.

Tax and travel experts in Australia have suggested the new rules might effectively “kill” loyalty programs, as there would be little benefit in signing up.

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