SecProbe.io

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                                  May 27, 2005

                                                                       VIA EDGAR
Mr. Mark P. Shuman
Ms. Sara Kalin
United States Securities and Exchange Commission
Division of Corporation Finance
450 Fifth Street, N.W.
Washington, DC 20549

Re:      Catuity, Inc.
         Preliminary Proxy Statement on Schedule 14A
         Filed May 12, 2005
         File No. 0-30045

Dear Mr. Shuman and Ms. Kalin:

         On behalf of Catuity, Inc., a Delaware corporation (the "Company"),
this letter sets forth the Company's responses to the comments of the Staff of
the Division of Corporation Finance (the "Staff") contained in your letter dated
May 24, 2005 to Mr. John H. Lowry, Chief Financial Officer and Secretary of the
Company. For reference, each Staff comment is reprinted below in italics,
followed by the corresponding response of the Company.

         1. Please disclose whether you have any current plans, proposals or
arrangements regarding the options to be authorized under your new restricted
stock plans or the additional options authorized under your existing stock
option plans. For example, have you agreed to issue options or restricted shares
to any specific individuals? If so, please disclose and if not, please revise
the disclosure regarding each applicable proposal to indicate that you have no
such plans at this time.

         RESPONSE: The Company has added disclosure regarding any current plans,
proposals or arrangements for the proposed options or restricted stock in
proposals 9, 11, 14, and 15. For your convenience, a copy of each of the changed
pages of the proxy statement containing the additional disclosure is included
with this letter.

         2. While we note the disclosure you have provided in your "Risk
Factors" section regarding the dilutive effect of the acquisition on the current
shareholders, please expand your disclosure regarding Proposal 6 to more clearly
indicate how the ownership of the Company will change following the acquisition.
For example, it appears there would be a material change to the Company's
beneficial ownership following the acquisition. Consider including a beneficial
ownership table in this section to present both pre- and post-acquisition
information.

         RESPONSE: The Company will add a beneficial ownership table that
presents both pre- and post-acquisition information following the discussion of
the Share Sale Agreement in the Proxy

<PAGE>

Mr. Mark P. Shuman
Ms. Sara Kalin
May 27, 2005
Page 2

Statement. For your convenience, a copy of the changed pages with the pre and
post acquisition beneficial ownership table are included with this letter.

                                      * * *

         The Company acknowledges that (a) the Company is responsible for the
adequacy and accuracy of the disclosure in its filings; (b) Staff comments or
changes to disclosure in response to Staff comments in the filings reviewed by
the Staff do not foreclose the Commission from taking any action with respect to
the Company's filings; and (c) the Company may not assert Staff comments as a
defense in any proceeding initiated by the Commission or any person under the
federal securities laws of the United States.

         I will be out of the office until Thursday, June 2, 2005. In my
absence, if you have any questions or require additional information, please
feel free to contact Lee Kellert with Jaffe, Raitt, Heuer, & Weiss, the
Company's legal counsel at (248) 727-1413.

                                   Sincerely,
                                  CATUITY, INC.

                                /s/ John H. Lowry

cc:      Alfred H. (John) Racine, III

<PAGE>

      Disputed claims for indemnification are subject to mediation. If mediation
fails, the dispute may be submitted to court in Victoria, Australia, unless
Majority Shareholders unanimously agree to have the claim arbitrated.

FEES AND EXPENSES

      Catuity will bear all stamp duty payable in connection with the Share Sale
Agreement. Subject to the stamp duty, the parties will each bear their own
legal, accounting and other costs and expenses in connection with the
preparation and execution of the Share Sale Agreement and the transactions
contemplated under this Share Sale Agreement.

AMENDMENTS AND WAIVERS

      The Share Sale Agreement may not be amended or modified unless the
amendment or variation is in writing signed by all parties. Waiver of any power
or right under the Share Sale Agreement must be in writing signed by the party
entitled to the benefit of that power or right and is effective only to the
extent set out in that written waiver.

                    DESCRIPTION OF OTHER MATERIAL AGREEMENTS

EMPLOYMENT AGREEMENT WITH CHRIS LEACH

      As a condition precedent to Loyalty Magic's obligation to consummate the
acquisition, we are required to enter into an employment agreement with Chris
Leach, the current managing director of Loyalty Magic. We are currently
negotiating the terms of the employment agreement with Mr. Leach. We have
reached general agreement on the term of the contract, the responsibilities of
Mr. Leach and a general framework for his compensation, including performance
based incentives. We expect to finalize Mr. Leach's employment agreement prior
to the date of our 2005 Annual Meeting of Shareholders.

         BENEFICIAL OWNERSHIP PRE- AND POST-ACQUISITION OF LOYALTY MAGIC

         The following table provides certain information regarding the
beneficial ownership of our capital stock prior to and following completion of
the acquisition of Loyalty Magic by (i) each person known by us to beneficially
own or who is expected to own more than five percent of our common stock; (ii)
our Chief Executive Officer and the four most highly compensated executive
officers that earned more than US$100,000 (salary and bonus) for all services
rendered in all capacities to us during the year ended December 31, 2004
(including our former Chief Executive Officer, Michael Howe); (iii) each of our
Directors; (iv) all of our Directors and executive officers as a group; and (v)
all of the current shareholders of Loyalty Magic as a group.

         The post acquisition information included in the table below assumes a
per share price of A$5.00, the closing price on the Australian Stock Exchange on
May 25, 2005.

<Table>
<Caption>
                                    Prior to Acquisition                            Following Acquisition

                                                                    Percent                                         Percent
Name and Address of              Amount and Nature of Common         Owned        Amount and Nature of Common        Owned
Beneficial Owner                 Stock Beneficially Owned(1)         (2)         Stock Beneficially Owned(1)        (2)(3)
-------------------------------- -------------------------------- ------------ ---------------------------------- ------------
<S>                              <C>                              <C>          <C>                                <C>
Acorn Capital Limited
Level 12, 90 Collins Street
Melbourne Vic 3000 Australia     108,846 Direct                                108,846 Direct
                                 0 Vested Options                 14.0%        0 Vested Options                   9.4%

Duncan P.F Mount
Lot 8, 54 Lane Cove Road
Ingleside, NSW 2101 Australia    46,666 Direct                                 46,666 Direct
                                 2,167 Vested Options             6.3%         2,167 Vested Options               4.2%

Alfred H. (John) Racine
11 Altamont Circle, #51          0 Direct                                      0 Direct
Charlottesville, VA. 22902       50,644 Options (4)               6.5%         50,644 Options (4)                 4.4%

Michael Howe
62 Hampton Road                  3,450 Direct                                  3,450 Direct
Grosse Pointe Shores, MI. 48230  21,267 Vested Options            3.1%         21,267 Vested Options              2.1%

Alexander S. Dawson
38 Macleay Street, NSW 2011      15,000 Direct                                 15,000 Direct
Australia                        2,000 Vested Options             2.2%         2,000 Vested Options               1.5%

John H. Lowry
21972 Heatheridge                422 Direct                                    422 Direct
Northville, MI. 48167            8,333 Vested Options             1.1%         8,333 Vested Options                  *

Alan L. Gilman
4720 Morris Lake Circle West     267 Direct                                    267 Direct
Bloomfield, MI. 48223            2,000 Vested Options                *         2,000 Vested Options                  *

Clifford W. Chapman
10 Warren Ave.                   0 Direct                                      0 Direct
Spring Lake, NJ 07762            667 Vested Options                  *         667 Vested Options                    *

A&B Venture Fund Company Pty.
Ltd.
16-18 Bulletin Place,            0 Direct                                      304,992 Direct
Sydney, NSW 2000 Australia       0 Vested Options                 0%           0 Vested Options                   26.3%

All Catuity Directors and
Executive Officers as a group    62,355 Direct                                 62,355 Direct
(6 persons)                      65,811 Vested Options            15.2%        65,811 Vested Options              11.1%

All current Loyalty Magic
shareholders as a group (12      0 Direct                                      380,000 Direct
persons)                         0 Vested Options                 0%           0 Vested Options                   32.8%
</Table>

(1)      Beneficial ownership is determined in accordance with the rules of the
         Securities and Exchange Commission and generally includes voting or
         investment power with respect to securities. Shares of common stock
         subject to options, warrants or other rights to purchase which are
         currently exercisable or are exercisable within 60 days after March 31,
         2005 are deemed vested and outstanding for purposes of computing the
         percentage ownership of any other person. Except as indicated by
         footnotes and subject to community property laws, where applicable, the
         persons named above have sole voting and investment power with respect
         to all shares of Common Stock shown as beneficially owned by them.
         Share data does not include any Shares the beneficial ownership of
         which has been disclaimed pursuant to SEC Rules.

(2)      Percentage of Beneficial Ownership is calculated on the basis of the
         amount of outstanding securities plus those securities of the named
         person deemed to be outstanding under Rule 13d-3 (promulgated under the
         Securities and Exchange Act of 1934, as amended) by virtue of such
         securities being subject to rights to acquire beneficial ownership
         within 60 days after March 31, 2005. An asterisk indicates beneficial
         ownership of less than 1% of the common stock outstanding.

(3)      Does not include the shares to be issued in our Australian registered
         offering.

(4)      Does not include options to purchase 77,914 shares of our common stock,
         which are subject to shareholder approval pursuant to Proposal 10 of
         this proxy statement.

                              BUSINESS OF CATUITY

OUR BUSINESS

      Catuity provides technology-based solutions to retailers that are designed
to increase the profit they receive from their customers at the Point of Sale
(POS). Today, the Company sells a hosted, ASP-based system(1) that enables the
processing of member-based loyalty programs and which can deliver customized
discounts, promotions, rewards and points-based programs which are designed to
help retailers find, keep and profit from their best customers. The Company also
enables gift card solutions. In late 2004, the Company introduced the first
version of its new platform, the Catuity Advanced Loyalty System (CALS). The
system enables robust and highly customizable programs which work on a
retailer's payments terminals, Electronic Cash Register and on their internal
store networks. Catuity also offers IT services to retailers to support their
POS systems maintenance and custom development needs for both the deployment of
our technology solution and those of third parties which also touch the point of
sale.

      In 2004, Catuity underwent a significant change in its business strategy
following the decision of Target Corporation to stop issuing smart cards to its
customers that hold their Target-Visa co-branded credit card. This resulted in
the eventual shutdown of the Visa Smart Rewards Platform that Visa USA had been
developing for smart card usage in the United States and which utilized
Catuity's older smart loyalty software. This has significantly impacted the
near-term use of smart cards in the United States and resulted in Catuity
adopting a change in its business strategy. In 2004, Visa represented 75% of
Catuity's revenue while Target represented 11%. That revenue ended in the third
quarter of 2004. The Company has no expectation that either Visa USA or Target
will be a significant customer going forward.

-------------------------
(1) An Application Service Provider is a third-party entity that manages and
distributes software-based services and solutions to customers across a wide
area network from a central data center.

                                       39
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                                   PROPOSAL 9

  (TO APPROVE AN INCREASE IN THE NUMBER OF SHARES AUTHORIZED UNDER THE EMPLOYEE
                               STOCK OPTION PLAN)

GENERAL

      The ninth matter to be considered at the Annual Meeting will be the
approval of an amendment to the Catuity Inc. Stock Option Plan (the "Employee
Plan") to increase the number of shares for which options and other awards may
be granted from 63,333 shares to 300,000 shares.

      The Board of Directors initially adopted the employee plan in December
1999 and the stockholders approved it on March 16, 2000. The employee plan was
amended in 2001 to increase the number of authorized option shares to its
current level. The employee plan terminates on the earlier of (i) the tenth
anniversary of its effective date, (ii) the date all of the shares authorized
under the employee plan have been issued, or (ii) the termination of the
employee plan by the Board of Directors. The maximum period during which an
option may be exercised under the employee plan is 10 years from the date of
grant, except in the case of an Incentive Stock Option (ISO) granted to a 10%
stockholder, in which case the maximum period is five years from the date of
grant.

      The purposes of the employee plan are to attract and retain employees of
high ability and to motivate them to advance Catuity's and our stockholders'
interests. As of April 15, 2005, there remain only 17,824 shares available under
the plan for future awards to employees. However, 77,914 shares have been
awarded to Alfred H. (John) Racine, III subject to shareholder approval. As a
result, we need to increase the number of authorized shares under the plan in
order to honor the agreement with Mr. Racine and be able to make future option
award grants to eligible employees. With the pending acquisition of Loyalty
Magic, the number of employees eligible under the Plan will increase to
approximately 40. The proposed increase will allow the Company to award option
grants to the larger number of employees that will be eligible under the Plan.
Catuity's total number of shares outstanding will also increase substantially
with the acquisition of Loyalty Magic.

      On March 22, 2005, the Board