Reward program benefits can be tax-free
Frequent Flyers, Fly Buys, Retail Rewards, Christmas Clubs… Do any of these programmes sound familiar? Many companies and industries use these loyalty reward-based incentives to keep their customers. These schemes are designed to make sure that customers stay loyal and keep returning as repeat buyers – and they work.
The Tax Office now accepts these rewards received by employees as a personal benefit and are not included as assessable income. This is a result of a court case involving flight rewards received by an employee in their personal capacity in respect of the expenditure paid by the employer.
The case involved an employee that had accumulated air points as a result of business travel, on behalf of the company. Those points were converted into airline tickets for her parents, and they were not converted to cash. The court concluded that the points were related to her membership in the programme and not part of any contractual agreement or relationship between the employer and the rewards programme. So the fact that the employer had paid for the original flights had no relevance to the tickets or to her assessable income.
There would be an exception to this rule however, if a person performs a service on the basis that there will be a flight reward; therefore that person enters into the contract understanding that the reward is part of the compensation.
The Tax Office considers that most consumer based rewards programmes like Fly Buys, are generally aimed at domestic purchases and no amount is considered assessable income. They did state that if the reward accumulation exceeded 250,000 points as a result of a business relationship or business expenditure they may take a different view.
If you have any questions contact one of our Caulfield tax agents for further assistance.
Hillyer Riches Management Pty Ltd, (tax agents in Caulfield) is a Corporate Authorised Representative (No 466483) of Capstone Financial Planning Pty Ltd. ABN 24 093 733 969. AFSL / ACL No. 223135.This document contains general advice only and is not personal financial or investment advice. Also, changes in legislation may occur frequently. We recommend that our formal advice be obtained before acting on the basis of this information.
Click here to check out ATO updates on COVID-19.