Do you provide employees with a business credit card associated with a customer loyalty program?
Are employees able to convert loyalty points accumulated in connection with the business credit card to rewards (e.g. goods, personal flights, holiday accommodation etc.)?
Do you as an employer use the points accumulated under your business credit card to reward employees (or potential employees) with non-cash benefits?
Do any of your employees accumulate substantial frequent flyer points on a personal frequent flyer program (e.g. Qantas, Virgin) as a result of work related travel?
Are those employees able to convert the points to acquire rewards such as personal flights or to upgrade personal travel from economy to business?
Do you have employees who use their personal credit card to acquire customer loyalty points by paying for business expenditure (which you as an employer reimburse)?
If you answered yes to any of the above, you may find yourself under the scrutiny of ATO for providing FBT to employees.
The ATO has indicated that it will be targeting the use of customer loyalty programs. Employers who fall under the microscope may find they are left exposed to a substantial FBT liability. Employers may even be left holding the bag so to speak, where a former employee converts points to rewards AFTER they leave their current employment.
Don’t be fooled if you think the ATO audit selection criteria is limited to employers who accumulate more than 250,000 loyalty points in an FBT year.
The ATO will also apply the following criteria:
- The arrangement has no commercial purpose other than to allow the recipient to receive the rewards they are entitled to; and
- The rewards are being received in substitution for income that would otherwise be earned.
If you or your employees accumulate reward points under a customer loyalty program (e.g. credit card or frequent flyer), we strongly recommend that you review the arrangement to ensure that any FBT exposure is minimal.
If you are unsure if the accumulation or use of customer loyalty points by your employees exposes you to an FBT liability, we recommend that your accountant or speak to one of our FBT specialists at RSM for further advice.
At RSM we can help you stay on top of alerts and ensure you are kept up to date.