The Australian Taxation Office accepts credit card payments, but is it the best way to pay your ATO bill?
When the Australian Taxation Office approved credit card payments in 2009, people were concerned about the potential debt it would create. There was worry that taxpayers would use their credit cards to pay bills and become caught in an endless cycle of tax payments and mounting interest fees. However, there are some advantages of using your credit card to pay your tax costs. Here, we look at the pros and cons of using your credit card to pay your taxes and the steps you need to take if you decide to pay your ATO bill on plastic.
The advantages and disadvantages of paying taxes with your credit card
- Earn reward points. You can earn reward points for paying your taxes with some credit cards. You can redeem these for future cash savings, travel perks and other products.
- Ease your cash flow. If you haven’t set aside money for the end of the financial year, paying your taxes with your credit card can take the pressure off your cash flow, but remember that you’ll still have to pay everything back (plus interest).
- Benefit your credit history. A big transaction, if promptly paid, shows your ability to repay and improves your credit rating.
- Possible tax deduction. The credit card fee may be tax deductible for businesses.
- Risk of debt. If left unpaid, an amount as large as your tax bill can quickly amass interest and turn into an unmanageable debt. Repay your outstanding amount as soon as possible to avoid accruing interest.
- Ineligible for rewards. Tax payments may not be eligible for reward points. Check your product disclosure statement to confirm whether your card issuer considers tax payments (or government payments) an eligible purchase.
- Overspending for rewards. The surcharge levied may cost more than the value of the reward points.
- It may be considered a cash advance. Some credit cards may consider tax payments to be cash advances and will charge a fee for the transaction (usually 2-4%). Cash advances immediately accrue interest at a high rate.
How to pay your tax with your credit card
If you’ve weighed up the pros and cons and decided to pay your tax bill with your credit card, you have a few options to choose from. Browse below for the information you need to include and the different ways you can pay your tax bill on plastic:
What you need
- A Visa, MasterCard or American Express credit card. Please note that a surcharge applies to card payments. Visa and Mastercard charge 0.54% and American Express charges 1.45%.
- Your PRN (Payment Reference Number) or EFT (Electronic Funds Transfer) code, which can be found on your payment slip, debt notice or online at myGov.
How to pay
- Online via myGov. Log in to your myGov account, click on the “Australian Taxation Office” link, select “Tax”, then “Payments” and “Payment Options”. Choose the card payment option and fill in the details of your card.
- Online via Government EasyPay. On the website, click on "Make a payment". This will lead you to a secure webpage where you can fill in your personal and card details.
- Over the phone. You can call 1300 898 089 and use the Government EasyPay automated phone service to pay between $10 and $50,000.
While your credit card can offer convenience and cash flow relief when paying your tax, it’s important that you manage repayments promptly. Otherwise, high interest rates could saddle you with a heavy debt.Back to top