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Are frequent flyer points taxable?

If you've earned frequent flyer points from work activities, will they be taxed? Here's what you need to know.

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Do I have to pay tax on frequent flyer points from work trips?

It's a common scenario: you're taking a business trip and you earn a stack of frequent flyer points as a result. Do you have to declare the potential value of those points on your tax return? And does your employer potentially have to pay fringe benefits tax (FBT) on their value?

The good news is that the answer to both questions is usually "no". There's a specific Australian Taxation Office (ATO) ruling on the question of tax and frequent flyer points, TR1999/6.

The first key point is that individuals don't generally have to include the value of any frequent flyer points earned during their employment in their tax return. As the ruling notes:

Flight rewards received by employees from employer-paid expenditure are not assessable income.

In other words, if your boss has paid for a work trip, you can keep the points earned without needing to declare them as a source of income on your return.

There are some exceptions noted in the ruling. If you're a contractor and agree to do some work in return for a reward (in the form of flights paid for with points), you might then need to declare the value of those flights as income. But that wouldn't be the case if you're a regular salaried employee.

You could also be liable if you make a specific arrangement designed to increase points earned. For instance, if your employer agrees to let you charge a large number of business expenses to your credit card (thereby earning you points) and then reimburses them, this might be viewed as a substitute for income and potentially be assessed.

Does my employer have to pay fringe benefits tax on frequent flyer points I earn from work trips?

Ruling TR1999/6 also specifies that earning frequent flyer points for work travel won't normally result in an FBT liability. The ruling notes that flight rewards "are not subject to FBT as they result from a personal (that is, non-employment) contractual relationship".

Because your membership of a frequent flyer scheme is directly between you and the scheme, those points aren't considered to be a workplace benefit, even if you earned them through work travel. There are some exceptions detailed in the ruling, relating to family members who work in the same company or situations where the points form an agreed part of your contract. Again, these don't generally apply to regular salaried employees.

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The situation is less clear-cut if you own a small business. If you regularly run business expenses through your credit card, that could earn you a large number of points, and depending on the circumstances, these might be viewed as assessable for income for FBT purposes. ATO guidelines suggest that if you earn more than 250,000 points through business expenditure in a calendar year, you might be subject to an audit.

If that applies to you, then you should investigate further. A tax professional can give you specific advice on what you might need to do in this case.

DISCLAIMER: This article is general advice. It does not consider your own personal circumstances and may not be applicable to you. You should obtain professional advice and consider your own situation before acting on anything contained in our article.

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