Can you pay your taxes with a credit card?

If you owe money to the Australian Tax Office, or if you’re a sole trader or self-employed, you may be wondering if you can pay your taxes with your credit card.

And if you’re an avid points chaser, you may also be wondering if you can earn rewards points when using your credit card for ATO transactions.

As we’ve entered the new financial year, now is the time to work out the finer details on your tax before you lodge your return and/or pay any outstanding debts.

Can you use a credit card to pay your taxes?

Yes, you can use your credit card to pay the ATO. It accepts Visa, MasterCard and AMEX. Just keep in mind that any payments you make may have fees associated, and these vary depending on your card type.

ATO credit card fees:

  • MasterCard domestic – 0.18%
  • MasterCard international – 2.20%
  • Visa domestic – 0.38%
  • Visa international – 2.20%
  • American Express – 1.45%

As you can see, there are some savings involved if you use a domestic Visa or MasterCard for payments with the ATO. Using an AMEX or an international credit card carries significantly higher fees, so if you can avoid doing so, this may keep costs down.

Can I earn credit card rewards points by paying my tax?

A select few credit cards will allow you to earn rewards points on your credit card when paying for your taxes. The credit card providers may offer a lower earn rate per dollar spent when making a transaction with the ATO or other government bodies, so keep this in mind if you are points chasing.

To know if your credit card allows you to earn rewards points for transactions with the ATO, you will need to check the terms and conditions on your credit card. These are kept on your card provider’s website. A simpler way to find out if your card allows this is to contact the provider’s customer service team via phone, email or online chat.

AMEX credit cards generally do allow you to earn rewards points on your tax, but they do come with lower earn rates for any government purchases.

AMEX card earn rates for government spending

Card provider Credit card Government spend earn rate Regular earn rate
American Express Essential Credit Card

1

1.25

American Express Qantas American Express Ultimate Card

0.5

1.25

American Express Qantas Premium Card

0.5

1

American Express Qantas Discovery Card

0.5

0.75

American Express Explorer Credit Card

1

2

Westpac Altitude Black Bundle (Altitude Rewards)

1

3

Westpac Altitude Black Bundle (Qantas Rewards)

0.5

1.25

Westpac Altitude Platinum Bundle (Qantas Rewards)

0.5

1

Westpac Altitude Platinum Bundle (Altitude Rewards)

1

2

Source: RateCity.com.au. Data accurate as at 29.07.2020.

What are the risks of using your credit card to pay your tax?

Just like with any purchase on your credit card, using your card to pay for your taxes does come with its own risks.

You will need to keep in mind that even though it is a government transaction, you will still be charged interest on the purchase if you do not pay your statement in full that billing cycle. And if your tax debt is particularly big this year, or if your credit card comes with a moderate or high interest rate, the impact of interest on that purchase may seriously sting.

In fact, if your tax debt is higher than expected, there are alternatives to using your credit card to pay it off, including:

  • Considering a personal loan

If you’re looking to pay off this debt with your card and know you don’t have the funds to pay for it right now, it may be worth considering taking out a personal loan instead. This is because personal loans typically offer lower interest rates than credit cards. However, going into debt to pay for another debt isn’t necessarily the best financial situation to begin with, but if you have no choice, it is always worth doing your research.

  • Talk to the ATO about a payment plan

You won’t be the first person with a big tax debt, and you won’t be the last. The ATO is equipped to deal with these scenarios and may be able to assist you financially through making a payment plan. This way your debt is broken up into much smaller, manageable repayment amounts.

  • Talk to a financial adviser

If you’re struggling to make heads and tails of your finances, it may be worth reaching out to a financial adviser to get you through this difficult time. ASIC’s MoneySmart website offers a range of resources around how to choose a financial adviser.

How to pay the ATO with a credit card

The easiest way to pay the ATO with your credit card is to hop onto the ATO’s website with your credit card handy and follow the prompts on its ‘how to pay’ page.

The ATO does offer other payment methods, including BPAY. You can link your credit card to your BPAY account, but keep in mind that BPAY transactions typically do not earn rewards points. Further, some card providers charge interest on BPAY purchases at the cash advance rate, not the purchase rate, which may be higher.

If you want to pay the ATO via BPAY:

  • Biller code: 75556
  • Reference: your payment reference number

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Learn more about credit cards

How to pay a credit card

There are a few ways to pay a credit card bill. These include:

  • BPAY - allows you to safely make credit card payments online.
  • Direct debits - set up an automatic payment from your bank account to pay your credit card bill each month. You can choose how much you want to pay of your credit card bill when you set up the auto payments.
  • In a branch.
  • Via your credit card provider's app.

How do you use a credit card?

Credit cards are a quick and convenient way to pay for items in store, online or over the phone. You can use a credit card as a cashless way to pay for goods or services, both locally and overseas. You can also use a credit card to make a cash advance, which gives you the flexibility to withdraw cash from your credit card account. Because a credit card uses the bank’s funds instead of your own, you will be charged interest on the money you spend – unless you pay off the entire debt within the interest-free period. If you pay the minimum monthly repayment, you will be charged interest. There are many different credit card options on the market, all offering different interest rates and reward options.

What should you do when you lose your credit card?

Losing your credit card is a serious situation, and could land you in financial trouble. Here is a simple guide detailing what to do when you lose your credit card.

Lock you card – Contact your provider and inform them about your lost credit card. From here lock, block or cancel your card.

Keep track of transactions – Look out for unauthorised credit card transactions. Most banks protect against fraudulent transactions.

Address recurring charges – If your card is linked to recurring charges (gym membership, rent, utilities), contact those businesses.

Check credit rate – To ensure you’re not the victim of identity theft, check your credit rating a month or two after you lose your credit card.

How do you use credit cards?

A credit card can be an easy way to make purchases online, in person or over the phone. When used properly, a credit card can even help you manage your cash flow. But before applying for a credit card, it’s good to know how they work. A credit card is essentially a personal line of credit which lets you buy things and pay for them later. As a card holder, you’ll be given a credit limit and (potentially) charged interest on the money the bank lends you. At the end of each billing period, the bank will send you a statement which shows your outstanding balance and the minimum amount you need to pay back. If you don’t pay back the full balance amount, the bank will begin charging you interest.

Should I get a credit card?

Once you've compared credit card interest rates and deals and found the right card for you, the actual process of getting a credit card is quite straightforward. You can apply for a credit card online, over the phone or in person at a bank branch. 

What should you do if your credit card is compromised?

Credit card fraud is a serious problem. If your credit card is compromised and you’re wondering what to do, here are a few precautionary steps to take.

Contact you credit provider – Get in touch will your credit card provider. If you feel your card has been compromised, you should be able to lock or block it.

Monitor your accounts – Keep an eye on your credit card accounts. Any unauthorised transactions could be a sign your credit card has been compromised.

Check your credit rating – It’s also important to check your credit rating, to ensure you’re not a victim of identity theft or some other financial mischief.

How to get a credit card for the first time

A credit card can be a useful financial tool, provided you understand the risks and can meet repayment obligations.

If you’re a credit card first-timer, review your options. Think about what kind of credit card would suit your lifestyle, and compare providers by fees, perks and repayments.

Once you’ve selected a card, it’s time to apply. Credit card applications can generally be completed in store, online or over the phone.

When you apply for a credit card for the first time, you must meet age, residency and income requirements. As proof, you must also provide documentation such as bank account statements.

How to pay a credit card from another bank

Paying or transferring debt from one lender to the other is called a balance transfer. This involves transferring part or all of the debt from a credit card with one lender to a credit card with another. As part of the process, your new lender will pay out the old lender, so that you now owe the same amount of money but to a new institution.

Many credit card providers offer an interest-free period on balance transfers to help new applicants better handle their debt. During this period, cardholders are not required to pay interest on the debt they brought over from the other card. This can be a great opportunity for consumers to pay off credit card debt with no interest. There are often fees associated with balance transfers; normally, these are a percentage of the amount transferred.

So make sure you read the terms and conditions of the card before transferring any debt across.

What is a balance transfer credit card?

A balance transfer credit card lets you transfer your debt balance from one credit card to another. A balance transfer credit card generally has a 0 per cent interest rate for a set period of time. When you roll your debt balance over to a new credit card, you’ll be able to take advantage of the interest-free period to pay your credit card debt off faster without accruing additional interest charges. If your application is approved, the provider will pay out your old credit card and transfer your debt balance over to the new card. 

How do you apply for a credit card?

You can apply for a credit card online, over the phone or in person at the bank. Once you’ve compared the current credit card offers, the application process is quick and easy. Before you get your application started, you’ll need to gather your personal information like proof of ID, payslips and bank statements, proof of employment and details of your income, assets and liabilities. To be eligible for a credit card, you’ll need to be an Australian citizen over 18 and earn a minimum of $15,000 each year. Once you’ve applied for a credit card, you should get a response fairly instantly. If your credit card application has been approved, you should receive a welcome pack with your new credit card within 10-15 days.

How easy is it to get a credit card?

For most Australians, there are no great barriers to applying for and getting approved for a credit card. Here are some points that a lender will consider when assessing your credit card application.

Credit score: A bad credit score is not the be all and end all of your application, but it may stop you being approved for a higher credit limit. If your credit score is less than perfect, apply for the credit limit that you need, rather than the one you want.

Annual income: Most credit cards have minimum annual income requirements. Make sure you’re applying for a card where you meet the minimum.

Age & residency: You need to be at least 18 years old to apply for a credit card in Australia, and most require that you are an Australian citizen or permanent resident. However, there are some credit cards available to temporary residents.

How many numbers are on a credit card?

The numbers on your credit card actually follow a universal standard which is used to identify specific functions. Each credit card has a different amount of numbers. Visa and Mastercard have 16, American Express has 15 and Diner’s Club has 14. 

The first number on a credit card always identifies what type of credit card it is. Visa cards start with a 4, whereas Mastercard starts with a 5 and American Express with a 3. The remainder of the digits represent the account number, including the last number which is used to verify that your credit card is actually valid. 

Credit cards also have additional verification numbers, which are mainly used when the card isn’t present for phone and online purchases. These are the three-digit numbers on the back of Visa and MasterCard or the four-digit numbers on the front of an American Express card.

Can a pensioner get a credit card?

It is possible to get a credit card as a pensioner. There are some factors to keep in mind, including:

  • Annual income. Look for credit cards with minimum annual income requirements you can meet. 
  • Annual fees. If high fees are a concern for you, opt for a card with a low or $0 annual fee. 
  • Interest rate. Make sure you won’t have any nasty surprises on your credit card bill. Compare cards with a low interest rates to minimise risk.

What's the best credit card for rewards?

There is no one-size-fits-all best rewards credit card. It's best you research what type of rewards program you'd like, as well as the fees, interest rate and conditions associated with those types of cards before making a choice. 

Rewards credit cards can also come with high annual fees that may end up nullifying the rewards, so think how often you use the card to decide whether the benefits outweigh the extra cost for you. A card with a lower annual fee might require a lot of spending to get any useful rewards, while another card with a higher annual fee might need fewer purchases to get a reward.