The ATO changed the rules. Then came the backlash

The government’s ban on card surcharges was sold as a cost-of-living win for Australians.

But one unintended consequence has sparked a backlash from some businesses, with the Australian Taxation Office (ATO) moving to stop accepting credit card payments for tax bills from December — despite mounting concern from business groups and calls for a longer transition.

Why did the ATO do it?

The ATO’s move is linked to a broader shake-up of Australia’s payments system that took effect this month.

First Card surcharges were banned. Second, the rate banks charge businesses to transfer money from customers to businesses was cut from 0.8 percent to 0.3 percent. And thirdly, EFTPOS, Mastercard and Visa are forced to publish the merchant fees they charge so businesses can compare rates and avoid paying higher-than-average fees.

The fourth change flows from the lower fees banks charge on transactions because they subsidise frequent flyer and rewards points programs. Banks started raising annual fees and offering fewer perks ahead of the rate changes.

The decision followed the Reserve Bank’s ban on surcharges for EFTPOS, Visa and Mastercard payments, which began on 1 October. The ATO says continuing to accept credit cards and absorbing the processing fees would cost about $200 million annually.

Other government departments, including Border Force and the Department of Foreign Affairs and Trade (DFAT), say they will continue to accept card payments.

Why are people angry?

Some small businesses use credit cards to bridge or extend the gap between when a tax bill is due and having to pay it. Losing this option means finding cash sooner or arranging alternative finance. And credit cards offer rewards like frequent flyer points when they are used.

Business groups say there is a double standard because they have to accept cards and absorb the fees or raise prices, while the tax office simply withdraws the option to pay by card entirely. They also say the consultation period has been too rushed with just two months to adapt and raise concerns.

Why is it political?

Labor promoted the surcharge ban as a cost-of-living relief, but the ATO’s response has caused a small business backlash and the government’s reponse has been contradictory.

Ministers Anne Aly and Clare O’Neil urged further engagement and said a workable solution must be found for small businesses because they have “real concerns” about the ATO’s move.

Minister for Defence Industry Pat Conroy told Channel 9 on Friday morning that he’d like to see the ATO, “continue to consult with small business and make sure there’s an appropriate transition period”.

Meanwhile, the Coalition wants the ban reversed. Opposition leader Angus Taylor said the government should force the ATO to reverse the decision on Friday.

Shadow Treasurer Tim Wilson on Friday said: “The ATO needs to overturn its ban because this is a situation of complete inconsistency between the standard set for small business and the standard set for the Australian Taxation Office imposed by the Albanese government”.

How many people are affected?

The latest ATO data shows about 2.3 per cent of tax payments were made with credit cards in the 2024/25 financial year, most of them coming from privately owned wealthy groups, and public and multinational businesses.

The Australian Chamber of Commerce and Industry chief Andrew McKellar says the sector is worried and angry.

“There’s 4.9 million small businesses out there – active small businesses. Even if this only affects … around 5 percent of all of those businesses, that’s a quarter of a million individual small businesses who are directly inconvenienced by this,” he said.

What happens now?

Tax Lead at CPA Australia, Jenny Wong told SBS News that for small businesses experiencing temporary cash flow pressures, a credit card can provide flexibility in managing the timing of payments and meeting tax obligations.

The ATO’s direct communication with affected taxpayers is an important step and businesses should review any payment plans or direct debit arrangements linked to a credit card well before the 30 November 2026 deadline.

Businesses that may be impacted should speak with their accountant or registered tax agent as early as possible to explore alternative payment options, how to improve their cash flow and, where appropriate, discuss payment arrangements with the ATO.

Payment plans remain an option, but they are not automatically interest-free: general interest charge ordinarily accrues until the debt is paid, although some eligible activity-statement debts qualify for interest-free arrangements.

Treasurer Jim Chalmers is set to announce on Friday more funding for the ATO to delay the credit card ban for up to a year, according to the ABC.

— With additional reporting by the Australian Associated Press

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