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

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.

• Pay online at the ATO – Government EasyPay service
• Pay online as an individual or sole trader – MyGov account
• Pay via phone – 1300 898 089

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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