$47k ATO Tax Debt - Credit Card Points or Pay Upfront?

L[Deactivated] on 28/07/2020 - 10:00
Last edited 28/07/2020 - 10:43

Hi everyone,

I have a $47 000 tax debt. I do have savings to pay it off however I was wondering if i'd be losing out on points.

My main reason for wanting to accrue points is to use them for future flights. I am hoping to save the points to upgrade all of my flights to business class for a Eurotrip in a few years when covid allows us to travel again.

What would your advice be?

I have my own business so I can tax deduct the credit card fees - taking 30% off the actual fees. Eg. if the fees are $1000 then i would get 300 back as it is a business expense - making it $700.

The credit card surcharge with amex is 1.45% - making the fees $476 after tax deductions etc.

I have a friend who has the St George credit card and has used it to pay taxes for 4 years now. He used it to fund a round the world trip in business class.

Help! what is the smartest way to do this?

From the ATO website:

American Express

1.45%

MasterCard – International

2.20%

MasterCard – Domestic Debit

0.18%

MasterCard – Domestic Credit

0.73%

Visa – International

2.20%

Visa – Domestic Debit

0.38%

Visa – Domestic Credit

0.78%

Financial

closed Comments

      • FareEvader on 29/07/2020 - 18:33

        200k HECS? how many degrees do you have?

        • pinkybrain on 29/07/2020 - 22:01

          do think it was a law or medicine degree that cost this much?

          • capslock janitor on 31/07/2020 - 11:20

            @pinkybrain: my guess Med

            • pinkybrain on 31/07/2020 - 16:40

              @capslock janitor: yeah probably right
              since OP owns their own business
              which is likely GP or dentist

              if they own their own law firm
              they might know more law or accounting tricks
              and would not need to ask on this forum

              • capslock janitor on 31/07/2020 - 16:42

                @pinkybrain:

                if they own their own law firm
                they might know more law or accounting tricks
                and would not need to ask on this forum

                WE MUST HAVE THE SAME BRAIN.

              • Mister Popo on 31/07/2020 - 19:41

                @pinkybrain: Probably dentist, if you still have HECS debt as a doctor, you probably won't have worked long enough to start a GP clinic.

      • Aerith-Waifu on 29/07/2020 - 19:45

        WOW! That is high even for a local…………..

      • pinkybrain on 29/07/2020 - 22:00
        +1

        what type of business do you own?

        so you earn approx 117 to 156k a year?

    • Donaldhump on 29/07/2020 - 19:56

      If tax rate is 30 percent it would be 47k / .3

    • MrBillions on 29/07/2020 - 23:30

      impossible to work this out, too many variables

  • CalmLemons on 29/07/2020 - 16:04
    +1

    Do you mind me asking is that just GST debt or PAYG company tax debt?

    • [Deactivated] on 29/07/2020 - 18:10

      Just tax.

  • earth worm jim on 29/07/2020 - 16:12
    +1

    Mate you probably have enough income that CC point benifits would be nothing more than peanuts in comparison. Why go through the hassle. Just pay upfront, buy an AMG and spend the rest of your life on a golf course.

    • [Deactivated] on 29/07/2020 - 18:09
      +4

      I did buy an AMG, thats why i dont have much left to pay my taxes.

      • jmel on 29/07/2020 - 18:51

        poor decision. buy a Ferrari next cycle

      • CalmLemons on 29/07/2020 - 19:31
        +3

        Car loan?

        • [Deactivated] on 30/07/2020 - 16:26

          yep

          • CalmLemons on 30/07/2020 - 19:57
            +1

            @[Deactivated]: Assume you only did a partial loan and paid a bit via equity from the company?

            Did you get your GST back just on the lct barrier proportion?

            • [Deactivated] on 03/08/2020 - 09:12

              @CalmLemons: sorry i dont know enough to answer your question. I did not use equity from the company, I'm a contractor who offers my services so i dont really have an actual company - I contributed just 30k of my savings towards the car and the rest on a loan with a huge balloon in 5 years. I'll let future me deal with the balloon.

      • gram on 30/07/2020 - 00:32

        Oooooo which one

  • [Deactivated] on 29/07/2020 - 16:29
    +1

    In 100$ Gift cards that you can add points to your credit card. However that would mean 470 cards to swipe.

  • WaterMark on 29/07/2020 - 17:00

    You may need to check with your PDS. There may be an exclusion from earning points for Government organisations.

    Edit: someone already mentioned

  • funnysht on 29/07/2020 - 17:49

    Give them an IOU

    • gimme on 29/07/2020 - 22:02
      +2

      Name checks out

    • drfuzzy on 30/07/2020 - 11:27

      Theft is tax.

  • Drakesy on 29/07/2020 - 18:48

    Not sure if it's been brought up earlier,
    But I read on one of the Pointhack forums the government spending won't earn any points, however it can count towards your spending if you get a card with a signup bonus?

  • nobro25 on 29/07/2020 - 19:13
    +3

    Damn $47k is more than I earn before tax.

    • innov on 30/07/2020 - 09:21
      +1

      As Joe Hockey said "get a good job that pays good money"

  • hayythere on 29/07/2020 - 21:52
    +2

    I would say the bank fees incurred to pay out a tax debt would be non deductible as per the below link (it only shows a few lines but you get the message). This is assuming it's a personal tax debt and not a company.

    As such you won't get the tax deduction on the AMEX fees and the benefit is eroded more. Even with the tax deduction the benefit would be negligible as you are basically paying the close to the face value of the points (after factoring in airfare taxes etc).

    https://iknow.cch.com.au/document/xaftitccomUio762218sl28364…

  • gimme on 29/07/2020 - 22:00
    +1

    Even if it worked it's not worth it imo. Assuming you'd be paying at least 400 in cc surcharge for say 50k pts, you're better off getting a new cc with a signup bonus and pay a promo 1st year fee. More pts for less $$

  • Dc80 on 29/07/2020 - 22:58
    +3

    Last time I looked into this my understanding was you could pay by credit card but the only way to claim the surcharge as a tax deduction was if you already had the funds sitting in credit on your card.

    • MrBillions on 29/07/2020 - 23:31

      that is totally correct !
      so you need to preload your credit card with the funds first, then pay the tax bill with that card.

  • 11112007 on 30/07/2020 - 10:52

    Go on a payment plan, pay in instalments over an agreed period.

    • 4agte on 31/07/2020 - 21:07

      What makes them entitled to a payment plan? GIC rate is not competitive. They should PIF

  • Cleremy on 30/07/2020 - 11:18

    Describing it as a "debt" implies that you borrowed money from the ATO.

  • [Deactivated] on 30/07/2020 - 11:20

    🤣🤣🤣

  • tullyman88 on 30/07/2020 - 11:47

    Use Amex Jen you'll be right!

  • IngenuityDenied on 30/07/2020 - 13:34
    +1

    OP you might be able to pay with ZipPay. It has been discussed in this thread Paying ATO tax bill with ZipPay/Money

    • kdh on 01/08/2020 - 06:49

      Anyone with experience on paying with ZipPay? Im just worried that the banking institutions might end up reclassifying the ZipPay transactions as an ineligible transaction (E.g. cash advance or what not)..

  • Hangryuman on 30/07/2020 - 14:23

    last I looked I think my credit card points awards scheme had changed their terms and conditions to no longer award points for payments to government institutions

    I think companies had been getting millions of points and free first-class airfares just from running all their medium-sized company expenses on the credit card

    so the awards schemes finally put a stop to that - so suggest read your fine print.

  • akajin on 30/07/2020 - 17:15

    Although rates are bad, would it be worth getting qantas travel money debit card to pay tax and get points?

  • Fusakin on 30/07/2020 - 17:41

    I've used Yak Pay previously. I'm going to try Zip this time round. Fees works out to be cheaper.

  • bryans on 30/07/2020 - 17:57

    Was the tax debt incurred from capital gains or income off an asset.

    • Drakesy on 30/07/2020 - 18:36

      OP clarification

      I dont get my taxes withheld. I operate as a sole trader… i get 100% of my earnings then pay tax in one hit.

  • pistachio on 30/07/2020 - 21:17

    But you are paying ATO interest on the tax debt.

    Check your tax account
    ATO charges interest every month. Their interest rate is around 8% annum last time when I checked.

    • netjock on 31/07/2020 - 10:02

      ATO is shark lender.

      • 4agte on 31/07/2020 - 21:09

        What? The ATO is not a financial institution. GIC rate is always the reserve rate plus 7%. Always has been. Don't like it, don't use the ATO like a bank

        • netjock on 01/08/2020 - 14:39

          Didn't realise that ATO took deposits too and paid interest.

          Reserve rate +7% on pretty much a secured debt (unless you run off to a country with no extradition treaty) is steep.

          Do you see any government infrastructure projects with a 7% return. NBN is case to the point.

  • Manta2510 on 30/07/2020 - 21:46

    This could be one way to do it

    https://www.qantas.com/au/en/business-rewards/news/points-ha…

    From the site:
    "While card issuers will give you reduced or zero credit card reward points when you pay the ATO, you can increase the reward points you earn by using a third-party payment service like B2Bpay.
    With B2Bpay, you can pay by Mastercard®, Visa® or American Express®. Plus, each time you use a Qantas Points earning credit or charge card to pay your bills through B2Bpay, you can earn Qantas Points twice. Earn once with your Qantas Points earning card (including government and ATO spend).+ And earn points again using B2Bpay, up to 3 Qantas Points per $1.50 in payments.*"

    Havent used this, but sounds promising

    • netjock on 31/07/2020 - 12:07

      If Qantas is onto it then it must be a bad deal, can't see them giving regular person a good deal.

      I can see it working if OP signs up for like credit cards with a sign on bonus then spend up to the bonus on B2Bpay, keep repeating until 47k is cleared.

    • Ozbargainlyf on 31/07/2020 - 15:04

      They had really good sign up offers and gave like 20k points away for initial signup usage, but just gets worse and worse. "up to 3 qff per $1.50" is rubbish as its with like 3 partners. Its often much much less.

  • d39833 on 31/07/2020 - 01:00
    -7

    47K is a standard amount to be paying in Taxes in Australia. Where I work 150k+ tax every year is a normal thing. My first job after graduating lead me to pay 36k in tax for that year.

    • michaelTito on 31/07/2020 - 07:19
      +6

      I was getting 50% off meal when I was working at maccas. You don't see me brag about it.

      • d39833 on 01/08/2020 - 03:49
        -2

        If you studied enough and worked smart, you along with the other 5+ people would not have put these comments. Our taxes pay for your healthcare and luxury. We are the true contributors to this economy creating jobs while others enjoy their discounted bigmacs.

        • michaelTito on 01/08/2020 - 06:54

          LOL someone sounds pretty upset.

          • d39833 on 01/08/2020 - 17:07
            -1

            @michaelTito: Nope..I just wanted to see if I got more down votes. Every one contributes in one way or the other.

  • LXE3 on 31/07/2020 - 07:08

    Did you find a good solution? I’m on quarterly, so I figure this could work well for me too.

  • Ozbargainlyf on 31/07/2020 - 14:59
    +1

    Hey OP, i extensively looked at it and even with deductibility of the surcharge, i couldn't justify paying the extra surcharges. I've used B2bpay, rewardpay etc in the past to use amex's to pay tax bills but it never added up, you were almost paying 1c: 1 point kinda thing, so unless you leverage it to business class or above tickets it doesn't add up. With the frequent devaluations of points (like they did Oct last year for QFF), its just getting worse and worse

    eg. use to be 1.5 points per dollar with amexs. 1.45% so on $100 its $1.45 and you get 150 points. 40% deduction on 1.45, so 0.95c ish for 150 points.

    now my amex is 1.25 or less, you can see why it keeps getting worse. Plus few cards now give points to ATO transaction, so using Rewardpay will charge you 2.2% or more.

    • daft009 on 31/07/2020 - 20:34

      Yes was hugely worthwhile but these days not so much. Maybe even less so after the next round of devaluations post covid that the airlines will have to do

  • khomeini on 01/08/2020 - 01:20

    You're a smarter one than I. I had a similar amount last year and was told by the accountant to pay it in one hour rather than payments etc.

    I just did a bank transfer and could breathe easier. I'm not a strong believer in credit card rewards but you've got me thinking… In hindsight visa or whatever offers the most rewards will be my choice.

  • savingM on 01/08/2020 - 10:19

    I think I have a better way lol, pm. :)

  • Wiser on 01/08/2020 - 12:25

    Deliberately not paying tax on time and expenses related that being desducted as expenses should be illegal.
    I am surprised ATO allows such tactics.
    It is your choice to pay the tax liability using credit card and you have to bear the expenses related to that not other taxpayers who pay on time and PAYG payees.

  • [Deactivated] on 03/08/2020 - 09:19

    Thanks for all of your input. It seems the general consensus is to not pay the high fees for the points.

  • Moderatormoocher on 03/08/2020 - 10:49

    Thread closed as OP has disabled account.

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