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Frequent Flyers fly tax free

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Nat 98/40

FREQUENT FLYERS FLY TAX FREE < - * * ^ f ~ * * ' · * « · * » · A -4A K S L***-*si

The Tax Office today released a revised draft ruling stating that almost all flight rewards received as a result of tax-deductible expenditure are not subject to income tax and that employers would not have to pay fringe benefits tax on these rewards.

Second Commissioner. Michael D Ascenzo, said the Tax Office had amended a draft ruling issued in August 1997 after receiving comments from industry associations.

“The amended draft ruling only deals with flight rewards," Mr D'Ascenzo said.

"The previous· draft ruling- attempted· to- cover ail consumer loyalty programs, but the industry replies showed that there were some variations that could not be adequately covered in an omnibus ruling. Sy focussing solely on flight rewards, the Tax Office knows that it can provide a definitive answer for most taxpayers.

“Flight rewards that are received by an individual, whether or not as a result of business expenditure, are not assessable income where they arise under a personal contractual relationship between the individual and the reward arranger," he said.

The Tax Office also released two draft determinations that apply to all consumer loyalty programs regardless of the type of reward that may be received. One considers membership fees for belonging to consumer loyalty programs and the other deals with rewards from private expenditure.

"Membership fees for these programs are only an allowable deduction when they are a business expense," Mr D’Ascenzo said.

"All rewards received as a result of private expenditure are free of tax, including golf clubs, televisions, etc., as such rewards do not have the characteristics of income.

"There may be a few taxpayers who find that the draft ruling does not address their particular situation. These taxpayers can request a private ruling from the Tax Office," he said.

Mr D'Ascenzo said the Tax Office would require the following information before it could provide a private ruling:

• How the points were derived (i,e„ what was purchased, how was it purchased, and why was it purchased that way); • The circumstances under which the person became a member; • The reward received and its value; and -

• Whether the reward was disposed of, and if so, what was received upon the disposal.

The draft ruling TR98/D9 and related draft determinations TD 98/D10 and TD 98/D 11 are open for public comment and are available from your local Tax Office or on the Tax Office's Internet site at w w w

CANBERRA 8 July 1998

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