ATO tweaks credit and debit card surcharge fees; MasterCards now cheaper than Visa

GUIDE: Earning Points
DIFFICULTY: Hard
TIME TO READ: 9 minutes
POSTED: September 15, 2017
UPDATED: September 18, 2017
LOYALTY PROGRAMS: Relevant to Multiple Programs
STATUS: Updated in September 2017 with new surcharges from ATO

At some point in August ATO rolled out some new surcharge fees for payments using different credit or debit cards, with a reduction in fees for some card types.

Among the winners are MasterCard credit and debit card holders, who see fees drop from 0.54% to 0.4% and 0.15% respectively, while Visa debit also reduces to 0.15%.

The Visa credit card surcharge increases a little to 0.58%, and new overseas card surcharges of 2.7% for international Visa and MasterCard payments now apply. American Express fees stay the same at 1.45%.

Many of the cards left that earn points on transactions made at the ATO are MasterCards, so holders of the Bankwest Qantas or Coles flybuys with tax bills will be left a little better off when it comes to paying a surcharge in order to earn points on the card. For the full breakdown of how each card washes out, read on.


Earning points for ATO transactions when using your credit or debit card

One of the questions often considered by anyone who has to pay tax bills to the ATO is ‘how do I earn the most points on this transaction?’

The answer is a moveable feast – cards keep changing, so we’ve attempted to bring our list of cards that allow points to be earned when paying your tax bill.

Many banks explicitly prohibit earning points on these types of transactions, with a common theme of more banks explicitly removing ATO payments as being eligible for points earn.

There are a few cards on the market that do still offer the ability to earn points for ATO transactions, and in this guide we’ll cover off the current list of cards, their notable terms and restrictions, and a small number of points-earning alternative payment options.


Navigating this guide

This a complex topic that requires explanation. There’s no single best answer for everyone – it will depend on the cards you may already hold and the rate at which you are prepared to fund a surcharge in order to use your credit card.

As a result this guide is split into several sections:

  1. Caveats and disclaimers ↓
  2. Cards that earn points at the ATO ↓
  3. Considerations when using points-earning credit cards to make tax office payments ↓
  4. How to make a payment to the ATO using a credit card ↓
  5. A detailed look at the PDS/Terms & Conditions for the cards referenced ↓
  6. Other options for paying the ATO and earning points ↓

If you’re planning on making a payment to the ATO using a credit card, you should absolutely read this guide in its entirety – there’s a lot of important and useful info in here! Set aside some time to read and understand it in full.


Please note – caveats and disclaimers!

This list comes with some caveats. Please read and understand these before making any decision around which credit cards to use for ATO Payments.

  • Do your own research by reading the Credit Card and Rewards Program PDS documents, asking the relevant bank, and your own research from other online sources.
  • We have tried to make this list as complete and as accurate as possible, but it’s possible we could have missed a card, have an error in our calculations, or didn’t complete quite enough research. Please let us know in the comments of this article if you find anything wrong.
  • There are legitimate reasons for having to pay the ATO as either a personal entity, or as a business entity. Many banks prohibit unreasonable amounts of business transactions on personal cards. We have tried to note the relevant terms and conditions of different bank rewards programs below. Our recommendation: if using a card extensively for business purposes, consider a specific business credit card that explicitly permits points earn at the ATO.
  • Any advice in this guide is general advice only and does not consider any of your personal circumstances and existing banking relationships / products.
  • Things can change. This list was last published / updated on the date shown at the top of this guide. We will try and keep it updated, but it may not be absolutely current.

Frequent Flyer / Rewards Credit Cards that earn points at the Australian Tax Office (ATO)


Credit CardEffective cost per frequent flyer point earned when paying ATO surchargePoints earned @ ATOComments / NotesPoints Caps
Commonwealth Bank Business Awards Platinum

Notes ↓ | Guide →
0.80c per Velocity Point or
1c per Qantas Point

(0.40c per Commonwealth Awards point)
1 Awards points per $ spent on MasterCard
=
0.5 Velocity Points per $
0.4 Qantas Points per $
CBA Awards Terms explicitly permit points earned at the ATO and for Business Transactions up to the points cap - see notes below

Points calculations made assuming transactions on the MasterCard, which for changes effective July 1 offers better value/return for ATO spend than the American Express
300,000 CBA Awards points per year =
150,000 Velocity Points per year
120,000 Qantas Points per year
Bankwest Qantas World MasterCard

Notes ↓ | Guide →
0.61c per Qantas Point0.66 Qantas Points per $Bankwest Qantas Rewards terms exclude points earn on, amongst other things, "government charges" and "business related expenses"- see notes below

Bankwest Qantas World is invite only so Platinum included as additional reference point.
No changes to Bankwest cards announced yet in 2017.
Uncapped
Bankwest Qantas Platinum MasterCard

Notes ↓ | Guide →
0.80c per Qantas Point0.5 Qantas Points per $200,000 Qantas Points per year
Coles Rewards MasterCard (flybuys)

Notes ↓ | Guide →
0.46c per Velocity Point
0.50c per Etihad Guest mile

(0.20c per flybuys point)
2 flybuys points per $
=
0.87 Velocity Points per $ or
0.8 Etihad Guest miles per $
flybuys MasterCard terms & conditions prohibit points earning for business transactions - see notes belowUncapped flybuys earn; maximum transfer of 128,000 flybuys points to Velocity each year; no cap on transfers to Etihad Guest
Most other American Express-issued Cards
e.g. Platinum Edge, Platinum Charge, Business Accelerator
2.90c per point (various rewards programs)0.5 points per $ spentCheck the individual guides for each card in our cards table
Non Credit Card Options
Qantas Cash

Notes ↓ | Guide →
0.60c per Qantas Point0.25 Qantas Points per $Business and government transactions not mentioned as disallowed in terms - see notes below

Ability to pay ATO and earn points is anecdotally possible. Untested by Point Hacks however.
Effective maximum of $100,000 loaded per 12 month period = 50,000 points earned
See notes on load and balance caps

About this table

  • There is no ranking or endorsement of a specific credit card implied in the above table.
  • We have included the highest points earner in each bank’s card range, regardless of annual fee, to keep things as simple as possible.

The following cards/banks do not earn points for ATO transactions: ANZ Rewards & Frequent Flyer, CBA (personal cards), Citi (and managed cards, including Virgin Money, CUA and Diners), NAB, HSBC, Qudos Bank, Macquarie Platinum / Hilton, Jetstar MasterCard, Woolworths Money, and as of July 1st, those linked to Westpac Altitude and St. George Amplify programs – and most others.


Considerations when using a points-earning credit card to make a tax office payment

There are a handful of different ways to make a payment to the ATO, and this guide is focused on the ability to make a payment that earns rewards points.

When paying the ATO directly using a credit card, you’ll incur a surcharge on the payment.

Current credit card surcharges for payments to the ATO

Payment MethodSurcharge Imposed by ATO
American Express1.45%
MasterCard0.40%
Visa 0.58%
Visa/MasterCard Debit0.15%
Visa/MasterCard International payments2.70%

The surcharge amount is often a tax deductable expense for a business – but double check with your accountant or tax advisor for your own circumstances if planning to claim this expense as a tax deduction, or if this is important to you.

Your personal circumstances might dictate that a payment via Bank Transfer or BPAY makes more sense than incurring a surcharge, so bear that in mind. Any advice on this guide is general only and does not take into account your personal circumstances.

How to work out whether the ATO credit card surcharge is worth paying

This is a key part of figuring out whether to use a points-earning credit card for ATO payments.

The first thing to consider is the value you place on your points. You can check out my list of rewards points values here, which might help you.

Once you have a handle on how much you value a point, you can then place a value on the total number of points earned by paying the ATO with a credit card surcharge.

Here’s a simplified example.

Say you have a 1 point per dollar earn on a MasterCard or Visa, and you value the points earned at 1.5c per point. If the tax bill you have to pay is $2,000, then you’ll earn 2,000 points, which have a value to you of $30.00.

With the ATO’s surcharge of 0.40% on MasterCard payments, you are paying $8 to earn the 2,000 points, or 0.40c per point. The $8 paid is less than the $30.00 you value the points earned, so in this case you may consider paying using this credit card.

As an alternative example, let’s consider an example with an American Express, with a 0.5 point per $ earn rate. The surcharge of 1.45% means that you are paying 2.9c per point, which is higher than the 1.5c per point value you place on the points earned, so in this case you most likely wouldn’t consider paying using this credit card.

So three things you need to consider before you decide whether a surcharge is worth paying:

  1. The value you place on points you earn with your credit card
  2. How many points the credit card you are planning to use earns per $ spent at the ATO
  3. The surcharge incurred for using your chosen payment method by the ATO.

Important! This analysis does not take into account:

  1. Any tax-deductability of the ATO payment fee
  2. The cost of ownership of the credit card, such as it’s annual fee
  3. The cost of any interest incurred for balances you are carrying on the card – the assumption in this guide is that no interest will be paid for your ATO payment. If you are planning on carrying the ATO balance on a card and incurring interest on this balance, then the interest incurred will likely be far higher in cost than the value of the points earned.

How to make a payment by credit card directly to the Australian Tax Office

The primary way to make a payment to the ATO by credit card is to head to the ATO EasyPay Portal and input the reference number given to you by your accountant or the ATO for your payment.


R

A detailed look at the PDS/Terms & Conditions for the cards referenced in the table

Let’s get stuck into some details of some of the cards in the table and their related terms and conditions.

Some unrelated terms between section headings and conditions have been removed for readability – these are marked with a ‘…’.

Commonwealth Bank Business Awards Platinum American Express & MasterCard

There’s a $300 annual fee with this card, and business transactions along with points earn at the ATO are expressly permitted. The PDS for the CBA Business Platinum account is here.

This states:

Platinum Business Awards and Platinum Business Awards with Qantas Frequent Flyer Direct
Platinum Business Awards Members may earn a maximum of 300,000 Awards points per year…

  • Earn 3 Awards point per $1 spent overseas (including purchases made online at overseas websites) or at Higher Points Merchants in Australia and earn 0.5 Award point per $1 everywhere else when using the linked American Express Card
  • Earn 1 Awards point per $1 spent using MasterCard

Section 18
The following transactions are excluded from earning points: BPAY transactions, payments to the Australian Taxation Office unless made using a Business Awards card…

  • …transactions deemed by the Bank to be for business purposes (excluding transactions on Business Awards, Business Gold Awards and Business Platinum Awards cards)

To then calculate how many CBA Awards points are needed to transfer to frequent flyer programs, reference the Awards Program terms here.

This states:

  • 1 Qantas Frequent Flyer point = 2.5 Awards for Platinum
  • 1 Velocity Frequent Flyer point = 2 CommBank Awards points for Platinum

And thus we get to the earn costs and rates shown in the table at the start of this guide.

Back up to table ↑

Bankwest Qantas World and Platinum MasterCards

The Bankwest Qantas PDS can be found here.

This states:

Qantas Points are earned on all purchases made using the Card Account except:

  • … Government charges (other than GST payable in connection with the purchase of goods or services on which you earn Qantas Points)
  • Business Related Expenses; and
  • any other transactions which from time to time may be excluded by us.

There is no definition of ‘Government charges’ in the document so it’s unclear if Bankwest do consider a personal transaction to the ATO as a Government charge. It is clear the card shouldn’t be used for business related expenses, and that the bank can also decide that any transaction they feel like can be excluded from point earning.

Back up to table ↑

Back up to table ↑

Coles Rewards MasterCard

Coles do not specify that the Coles Rewards MasterCard forbids points being earned for government or ATO charges. The PDS for this card is here.

However, transactions for business purposes are defined as an ineligible transaction for earning points:

Excluded Transactions means:
(7) transactions Wesfarmers Finance decides are wholly or partly for business purposes

In addition, Wesfarmers, the owner of Coles and Coles Finance products, sold the Coles credit card business to Citi in February 2017. This could mean that at some point the cards are moved over to being issued and managed by Citi, who don’t permit earning points at the ATO for any of their cards, including those from Virgin Money who they also issue credit cards for.

Back up to table ↑

Points-earning non-Credit Card Options for ATO Payments

There are a small number of payment options outside using the EasyPay portal with a credit card for paying the ATO – primarily Visa or MasterCard debit cards, which is the case for Qantas Cash. Unfortunately, Velocity Global Wallet announced some changes in September effectively removing the possibility of earning points at the ATO.

As a general note, the primary difference between using a prepaid card option vs a credit card is that you’ll need to fund the account before making a payment. You’ll need to bear that in mind from a cashflow perspective.

Qantas Cash

The PDS for Qantas Cash is here.

This states, that for earning points:

Eligible purchases include all purchases of goods and services made using Qantas Cash, but excludes money orders, traveller’s cheques, gambling chips or purchasing foreign currencies in cash.

Given this is not a credit card, there are other restrictions and considerations in how it can be used. These are the key things to be aware of for this use case. The PDS states:

  • Maximum individual amount you can load on Qantas Cash in any 24-hour period: AUD $20,000
  • Maximum value of point of sale (POS) transactions performed in any 24-hour period: AUD $15,000 or equivalent
  • Maximum balance allowed at any one time across all Currencies: AUD 100,000 or equivalent
  • Maximum amount you can load across all Currencies during a 12-month period: AUD 100,000 or equivalent

If you can’t load money onto the card, you can’t use it to pay for anything, so there is a rolling 12 month points cap of 50,000 Qantas Points that can be earned on Qantas Cash across all transactions.

It doesn’t appear that there is a 12 month cap like Qantas Cash, but if using the card for larger payments you will need to bear that load limit in mind.

Another option could be BPAY from a credit card – but I haven’t researched or included those in the list.


Other options for paying the ATO and earning points

Another option for making payments to the ATO is to jump on prepaid debit MasterCard or Visa deals that can initially be purchased using a points-earning credit card.

Usually the cost of acquisition of these cards is too high, but there can be short-term offers for which you need to keep an eye out for, and then apply the same maths as above to figure out cost of payment method vs points earned.

There are also other hazards in using prepaid cards to pay the ATO – depending on the amount of money that can be loaded onto the card at point of purchase, you could be running many cards through the ATO payment portal, and each payment and its surcharge would need to be accounted for independently if it’s being made on behalf of a business.

Summing Up

There’s no ‘best option’ amongst this list, as the permitted transactions, points earned with each card, and associated cost (and return in points) of payment to the ATO varies greatly from card to card.

We also can’t recommend specific cards to use for your circumstances – so dig through the table and the list of considerations above and try and find an option that works for your own valuation of points and whether it is worth paying the ATO surcharge to earn them.

Their fees could change, of course, but I would consider that unlikely. American Express-issued cards such as the Business Accelerator or American Express Explorer would be cards to target to earn the most points when using their service.

Earning points from transactions to the ATO – once you have a card that offers this option – can be a very simple way to build your points balances from payments you had to make anyway.

It could also be a costly mistake if you over-value the points earned or pay using a card that you thought earned points with ATO transactions, but didn’t.

There’s no doubt this is a complex and ever-changing landscape. You can keep up to date on changes being made by banks this year in our RBA changes round up.

To sum up: there are still a number of points-earning credit cards for spend with the ATO, and our general advice is to try to read and understand the terms of each card as much as possible and try and find the right fit for your own circumstances and preferences.

ATO tweaks credit and debit card surcharge fees; MasterCards now cheaper than Visa was last modified: September 18th, 2017 by Keith