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Loyalty Programme Tax

Holiday IslandThe Tax Office has recently issued practice statement PS LA 2004/4 (GA) which discusses the circumstances in which rewards received under consumer loyalty programs may be subject to income tax or fringe benefits tax.

The courts have held and the Tax Office accepts that in most circumstances the rewards received under a consumer loyalty program are not taxable. The practice statement does not change this position. Importantly the practice statement does not change the position that a consumer loyalty reward that results from private expenditure is not assessable.

The practice statement identifies those circumstances where tax officers need to refer a taxpayer's case to a senior technical officer for further consideration of whether the rewards received are taxable. A taxpayer's circumstances will receive further consideration where:

  • the arrangement is so contrived and artificial that it has no commercial purpose other than to allow the recipient to receive the rewards to which they become entitled, and/or
  • the nature of the arrangements suggest that the rewards are being received in substitution for income which would otherwise be earned, and/or
  • the points accumulated from a business relationship or business expenditure exceed 250,000 points per annum.

Most taxpayers do not need to change their current behaviour. Nor will most taxpayers need to retain any records of how the points that they receive under a consumer loyalty program were earned.

Copyright Australian Taxation Office, July 16th 2004, http://ato.gov.au/individuals/content.asp?doc=/content/46921.htm

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