Paying ATO expenses with your business credit or charge card can offer an opportunity to earn valuable points, but it’s important to understand the role of surcharges and reduced earning rates.
Here’s your complete guide to optimising points earned on ATO payments, comparing direct payment methods with payment services, and understanding whether the points gained are worth the cost.
Understanding ATO Payment Methods and Surcharges
Paying the ATO directly with your business credit or charge card typically incurs a surcharge, and many cards earn points at a reduced rate for government payments, or not at all.
Here’s an overview of ATO-approved payment methods, associated surcharges, and point-earning implications:
| Payment Method | Surcharge | Points Earned |
|---|---|---|
| Visa/Mastercard (Credit) | 0.72% for Mastercard, 0.80% for Visa | Lower points, typically 0.25-0.5/$1 |
| Visa/Mastercard (Debit) | 0.20% for Mastercard, 0.40% for Visa | No points earned |
| American Express (Credit) | 1.45% | Lower points, typically 0.5/$1 |
| International Visa/Mastercard | 1.99% | May earn points, depending on the card |
Let’s break down the value of the points you’d earn if you directly pay $10,000 in ATO expenses using an American Express Platinum Business Card, which earns into Amex Membership Rewards. For this example, we’ve assigned a ballpark points valuation of 0.9 cents per point.
- Surcharge: 1.45% = $145 for a $10,000 payment.
- Points Earned: 1 point per dollar on government payments = 10,000 Amex Membership Rewards points.
Step 1: Valuing the points
At a valuation of 0.9 cents per point, the 10,000 Amex Membership Rewards points you earn would be worth:
- 10,000 points x 0.9 cents = $90 in rewards value.
Step 2: Net cost calculation
Now, calculate the net cost by subtracting the rewards value from the surcharge:
- Surcharge: $145
- Rewards value: $90
- Net Cost: $145 – $90 = $55 net cost.
In this case, you’d effectively be paying $55 to earn 10,000 Amex points, which translates to paying 0.55 cents per point. Given that you’re valuing your points at 0.9 cents per point, this makes the transaction cost-effective, as the cost per point is less than the value you’re assigning to each point.
However, as we’ll outline below, it’s possible to optimise return further, using a payment service.
What is a payment service and how do they work?
A payment service acts as a third-party platform that facilitates payments on your behalf, allowing you to pay expenses like ATO taxes, utilities, and supplier invoices using your business credit or charge card. This allows you to earn full points, even if the merchant doesn’t normally accept card payments.
These services charge your card and forward the funds to the intended recipient (such as the ATO) via bank transfer.
In Australia, a number of payment services are in operation, with key providers being Pay.com.au, Sniip, RewardPay, and B2Bpay. These services enable businesses to earn full points on payments that would otherwise only earn reduced or no points, such as government payments.
While they come with often sizeable surcharges, these platforms allow businesses to earn loyalty rewards while maintaining cash flow and extending credit card repayment terms.
Payment services surcharges: Crunching the numbers
Below are the standard, publically available rates for leading payment service providers in Australia.
Note that some services, like B2Bpay and Pay.com.au, offer premium tiers that may reduce these fees for high spending businesses, or if you pay a monthly fee. Businesses making frequent payments could lower their surcharge costs slightly by opting for these premium services.
| Service | Surcharge | Points Earned |
|---|---|---|
| Pay.com.au | 1.2% for Mastercard/Visa, 1.75% for Amex | Full points based on your card rate |
| Sniip | 1.5% for Mastercard/Visa, 1.75% for Amex | Full points based on your card rate |
| RewardPay | 2.4% for Amex | Full points based on your card rate |
| B2Bpay | 1.2% for Mastercard/Visa, 2.2% for Amex | Full points based on your card rate |
In addition to earning card points, transactions made through Pay.com.au also earn PayPoints. The rate of PayPoints earned can vary depending on your subscription level, with higher-tier memberships offering enhanced point-earning potential. These PayPoints can be redeemed for rewards, further boosting the value of using Pay.com.au for ATO payments.
Not all points programs are created equal
Before diving into paying ATO expenses for points, it’s essential to understand that not all points are worth the same. Programs like American Express Membership Rewards tend to offer higher value due to their flexibility—Amex points can be transferred to various airline and hotel loyalty programs. On the other hand, programs like Qantas Frequent Flyer and Velocity Frequent Flyer offer lower valuations because they are typically limited to fewer partners.
For example:
- Amex Membership Rewards Points: Valued around 10.9 cents per point due to their flexibility in transferring to different programs.
- Qantas and Velocity Points: Typically valued at around 1.5 cents per point, depending on how they’re redeemed.
- Bank Rewards Programs (e.g., Westpac Altitude, NAB Rewards): These points are often worth far less, around 0.5-0.75 cents per point, and are limited in redemption options.
Are surcharges on business payments tax deductible?
Another important consideration is that the surcharges levied directly by the ATO or payment services like Pay.com.au or RewardPay may be tax-deductible as a business expense.
However, this depends on your specific business circumstances. It’s advisable to consult with your accountant to determine whether these fees can be claimed, as this could further reduce the cost of earning points.
Example: Calculating the Cost of Points
Let’s use a $10,000 ATO payment as an example to compare the value of points earned through a Qantas linked American express business card via different services, assuming a valuation of 1.5 cents per point.
1. Direct Amex Payment
- Surcharge: 1.45% = $145.
- Points Earned: If the card earns 0.5 points per dollar, you’d earn 5,000 Qantas points.
- Value of Points: 5,000 points x 1.5 cents = $75.
- Net Cost: $145 surcharge – $75 value = $70 net cost.
2. Using Pay.com.au (Amex)
- Surcharge: 1.75% = $175.
- Points Earned: Full earning rate (1 point per dollar) = 10,000 Amex points.
- Value of Amex Points: 10,000 points x 1.5 cents = $150.
- PayPoints Earned: 10,000 PayPoints x 0.5 cents = $50.
- Net Cost: $175 surcharge – ($150 Amex value + $50 PayPoints value) = $25 net cost.
- In this case, the combined value of Amex points and PayPoints reduces your net cost to just $25.
3. Using RewardPay (Amex)
- Surcharge: 2.4% = $240.
- Points Earned: Full earning rate (1 point per dollar) = 10,000 points.
- Value of Points: 10,000 points x 1.5 cents = $150.
- Net Cost: $240 surcharge – $150 value = $90 net cost.
4. Using B2Bpay (Amex)
- Surcharge: 2.2% = $220.
- Points Earned: Full earning rate (1 point per dollar) = 10,000 points, plus bonus Velocity points.
- Value of Points: 10,000 points x 1.5 cents = $150 + bonus Velocity points value.
- Net Cost: $220 surcharge – $150 value = $70 net cost, plus the bonus points value.
Which option makes sense?
When deciding which payment service to use, it’s important to crunch the numbers based on your specific card and the surcharges involved. Each service has different fees, and the value you get from the points earned can vary depending on the points program you’re using.
What types of ATO payments can businesses earn points on?
Businesses can earn points on a range of ATO payments, including:
- Business Activity Statements (BAS): Payments for GST, PAYG withholding, and PAYG installments.
- Income Tax Payments: Including company tax and individual income tax for directors or sole traders.
- Superannuation Guarantee Charge (SGC): Payments made when employers fail to pay super on time.
- Fringe Benefits Tax (FBT): Tax payments for non-cash benefits provided to employees.
By using a points-earning business credit or charge card (directly or via a payment service), businesses can leverage these large, recurring expenses to accumulate significant rewards points over time.
Conclusion: Is it worth earning points on ATO payments?
The decision to pay ATO expenses using a points-earning service depends on the value of the points you’re earning compared to the surcharges.
General rule:
If you’re earning into a points currency valued at 1.5 cents or more per point (such as American Express Membership Rewards), using a payment service can offer solid returns, especially for Amex cardholders earning full points.
That said, Amex cards often come with higher surcharges. Visa or Mastercard users may face lower surcharges, but the points earned per dollar could be lower depending on your card’s rewards structure.
Ultimately, it’s essential to compare the surcharge against the value of the points you’ll earn. Calculating your net cost and the potential points value can help you determine whether using a payment service makes financial sense for your business.
Before choosing a method, crunch the numbers on whether the potential value of the points you’ll earn against the surcharge costs to ensure it’s worth it.
Maximise your business rewards today
Ready to start optimising your points earn on ATO payments? Whether you choose to pay directly or use a service like Pay.com.au or B2Bpay, make sure you’re taking full advantage of your business credit or charge cards to optimise every dollar spent.
