Intro
Corporate credit cards can deliver significant benefits to local governments through improved administrative practices and more effective cash management. However, they can also expose a local government to significant risks if not properly controlled.
The risks associated with credit cards can be minimised by implementing policies to control their use.
It is important to have a communication strategy that informs new employees and reminds existing employees of the policies governing the use of credit cards.
The following provisions of the Local Government Act 1995 (the Act) and associated regulations impact on the use and control of corporate credit cards:
When used correctly, a credit card can:
The following issues should be considered when developing policies and procedures for controlling the use of credit cards:
The Act does not make provision for the issuing of credit cards to elected members. A local government can only pay allowances or reimburse expenses to an elected member. There are no provisions within the Act which allow an elected member to incur a debt, as would be the case with a credit card.
The CEO should approve an application by a local government employee for a corporate credit card. In the case of the CEO, the council should approve the application.
The Australian Taxation Office (ATO) has a ruling available relating to GST and entitlements to input tax credits without a tax invoice (GSTR 2000/26). A copy of this ruling is available from the ATO's website at http://law.ato.gov.au/atolaw/view.htm
This ruling provides an opportunity for corporate credit card statements to be used to claim input tax credits without holding a Tax Invoice. This is only allowed when the corporate credit card provider, the user of the corporate credit card (and their organisation) have met certain conditions.
For details on whether a corporate credit card statement can be used in place of a tax invoice, local governments will need to contact their credit card providers directly. If there are any doubts as to the documentation required to claim input tax credits, then a tax invoice should be obtained for all purchases.
Card users should ask suppliers to record an adequate description of goods/services on the tax invoice to ensure appropriate levels of accountability.
It is important to remember that if a supplier does not have an ABN and Pay As You Go tax has not been withheld on the credit card statement, the local government is still liable to pay the corporate credit card provider the full amount and also the ATO 48.5% of the purchase price.