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. 

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Rewards Credit Card Comparison Table - rates updated daily

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    Kogan Money Black Card

    Kogan Money Black Card has no annual fee and no cap or expiry date on points. It comes with a 55 interest free days on purchases and a 0% balance transfer rate for the first 12 months. Earn up to $400 in Kogan.com Credit, $50 Credit on first eligible spend in 30 days and $350 Credit when you spend $1,500 on eligible purchases in 90 days from card approval.

    Rewards program
    Annual fee
    Bonus points
    Earn rate per $1
    Estimated points earned
    Kogan Rewards Points
    $0
    No current offer
    1 point uncapped
    Go to site
    Details
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    American Express Qantas Ultimate Card

    Receive 55,000 bonus Qantas Points when you apply, are approved, and meet the minimum spend criteria of $3,000 in the first 3 months. T&Cs apply. Available to new Card Members only.

    Rewards program
    Annual fee
    Bonus points
    Earn rate per $1
    Estimated points earned
    Qantas Frequent Flyer
    $450
    55,000
    1.25 points uncapped
    Go to site
    Details
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    NAB Qantas Rewards Signature Card

    NABs fastest way to earn Qantas Points. 110,000 bonus Qantas Points when you spend $3,000 on everyday purchases within 60 days of account opening and keep the card open for 12 months. Access to 6 complimentary insurances when you make eligible purchases.

    Rewards program
    Annual fee
    Bonus points
    Earn rate per $1
    Estimated points earned
    Qantas Frequent Flyer
    $395 $295 in the first year
    110,000
    1 point up to $5,000/month, then
    0.5 points up to $20,000/month
    Go to site
    Details
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    American Express Qantas Discovery Card

    Receive up to 1.75 Qantas Points for every $1 spent on Card purchases (T&Cs apply). No annual fee for the life of the card. T&C’s apply. Mozo Experts Choice Qantas Frequent Flyer Credit Card Winner 2020.

    Rewards program
    Annual fee
    Bonus points
    Earn rate per $1
    Estimated points earned
    Qantas Frequent Flyer
    $0
    No current offer
    0.75 points uncapped
    Go to site
    Details
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    Westpac Altitude Platinum

    Earn up to 130,000 bonus Altitude Points ($3k min. spend in the first 90 days on eligible purchases). 0% p.a. for 22 months on balance transfers requested at card application. 1% BT fee applies (rate reverts to the variable cash advance rate after). Discounted annual card fee of $49 for the first year ($150 thereafter). New Cards only. Offer ends November 30th 2021. T&C's and exclusions apply.

    Rewards program
    Annual fee
    Bonus points
    Earn rate per $1
    Estimated points earned
    Altitude Rewards
    $150 $49 in the first year
    130,000
    1 point uncapped
    Go to site
    Details

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: 

Personal: 

The general principle is that personal rewards received from loyalty programs, including flight rewards and cashback are not considered taxable income.

Business: 

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 Card Awards

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