Credit Card Consumer Loyalty Bonus Points

The ATO has begun to draft its plan of attack on the consumer loyalty programs such as frequent flyer points and credit card bonus points.

While no legislation has as yet been drawn up the ATO has drafted a guideline for its staff. The guideline signals the ATO’s intention to “review” all redemptions of such consumer loyalty program points over and above 250,000 points per annum per card.

The ATO is only concerned with the redemption of these points and not the “earning” of the points, therefore the taxpayer can earn more than 250,000 points in any one year and not be flagged for “review”.

If the points have been earned from paying business expenses the ATO will include the redemption of the points in the taxpayer’s income for that financial year.

The ATO are currently out there looking for a “test case” on which to try their theories.

Please note that as yet this is still a “fishing expedition” as the ATO has no set method of calculation to convert the bonus points to taxable dollars.

So where does it leave you? Well at the moment all we can say is “it’s business as usual” however if you are in the practice of redeeming more than 250,000 bonus points per annum be aware that the ATO is looking to target this practice and in the future such redemptions may be converted to taxable income in your name.

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