Frequent flyer programs and tax treatments

Airlines offer various frequent flyer programs which are aimed at improving customer loyalty. The Australian Taxation Office (ATO) accepts, as a result of Payne’s case, that air flight rewards received by employees from an employer’s paid expenditure are not assessable income.

Many companies require their employees to travel around Australia, and even though fights are paid by the company, the reward points for the flight often go to the employee.

Any customer loyalty program benefits earned as a result of private expenditure are not assessable. This is in line with ATO policy.

The ATO has indicated that it will closely scrutinise situations where the number of frequent flyer points accumulated in a year exceed 250,000 and arise from a business relationship or business expenditure, whereby the arrangement has no commercial purpose other than to allow the recipient to receive reward points.

In such cases, the ATO will treat such rewards as assessable income, or as a fringe benefit.

Experience tells you that it is often easy to accumulate the points, but hard to get the time to use them.

Call in to your nearest TaxAssist Accountants today for more information.

Date published 13 Feb 2017

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.