If you are currently paying business expenses on your personal credit card and collecting points then read on……..
There is a commonly held misconception that there are no tax implications for frequent flyer points [points].
This belief stems from twenty year old case law where the court determined that the points were earned from a personal contract with the airline rather than from any direct employment activity. However, this case specifically dealt with whether the points were assessable income and did not involve fringe benefits tax [FBT] considerations.
Updated guidance from the ATO has specifically dealt with the points / FBT issue and takes the view that rewards received from a consumer loyalty program would be subject to FBT where:
“a flight reward is provided to an employee….under an ‘arrangement’ for the purposes of FBTAA that results from business expenditure”
The important issue to consider is that ‘arrangements’ flowing from ‘business expenditure’ are very likely to trigger FBT considerations. Put simply if you are using your personal credit card to pay business expenses in your own business, or for your employer, then this is an issue that you need to give further consideration to.
In principle guidance from the ATO indicates if your arrangements of payment using the credit card has no commercial purpose, and is contrived to accrue points in excess of 250,000 a year, then you should consider your FBT obligations. These arrangements would always be assessed on an individual basis.
These can be complex matters with obligations that can continue for many years into the future. If you believe that this may be a consideration for you and your business please contact your manager at DLA partners for further advice.
This information does not constitute financial or legal advice and is for general information purposes only. Please contact DLA Partners for specific advice relating to your particular circumstances.