ATO’s unpopular credit card ban delayed for 12 months in win for businesses

The Australian Tax Office’s widely unpopular decision to ban credit card payments has been delayed beyond December 1 after it reached an agreement with the federal government.

The ATO announced it would stop accepting credit cards as a payment method after the Reserve Bank of Australia’s ban on card surcharges kicked in at the start of October.

ATO commissioner Rob Heferen said he could not justify absorbing the estimated $200 million in annual processing fees that would wind up costing the taxpayer more.

Australia’s business community has united in the past week to lash out at the changes, arguing they were made without proper consultation and would leave owners in the lurch.

In an attempt to stave off a political headache from businesses, senior Labor ministers put pressure on the government tax agency to consult business leaders to manage a transition process.

But on Friday, Treasurer Jim Chalmers announced the ATO will delay until the end of the financial year on June 30 to allow small businesses to transition to the changes.

“This will give them the time to consult more with small business and to get it right,” he told reporters.

“We take very seriously the feedback that the ATO and the government have received when it comes to implementing this surcharge ban.

“We try not to interfere with the RBA or the ATO when they go about designing and implementing this surcharge ban, but it’s really important that we have stepped in today to make it possible for the ATO to continue to take credit card payments until the end of the financial year.”

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The federal government will provide the ATO some “necessary” funding to push back the implementation.

“We’re always working to do the best that we can, in the context of quite substantial constraints in the budget, to do the best that we can for people,” Chalmers said.

The treasurer stood by the surcharge ban, which triggered the ATO’s abrupt response, and said it would save Australians $1.6 billion in surcharge fees and small businesses more than $900 million in interchange fees.

His announcement comes hours after Foreign Minister Penny Wong insisted that the federal government could not direct the ATO to make any decision amid calls for intervention and a reversal of the ban.

“They are independent. Governments can’t direct the tax office to implement tax in a certain way,” she told Nine’s Today.

“What we can do is say to them, you should be consulting with small business, and we would really encourage the ATO to engage with small business about this.”

ATO officials met business and accounting representatives on Wednesday and Thursday.

The tax office estimates about 5 per cent of small businesses (roughly 135,000 of the 2.7 million small businesses in Australia) and 2 per cent of individuals made their tax payments on credit cards in the 2024-25 financial year.

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Australian Chamber of Commerce and Industry Andrew McKellar said a significant number of businesses would have suffered under the changes.

“What we’re seeing is a situation which is very damaging for small business. Small business needs this facility in place,” he told reporters on Thursday.

“They’ve got to manage cash flow. What they are looking for is for one clear, consistent approach and solution from government.”

Small Business Minister Anne Aly and Housing Minister Clare O’Neil broke ranks on Thursday to raise their concerns about the ATO’s decision.

“I’ve spoken to small businesses, and they were rightly shocked by this decision. I do think they should have been consulted,” Aly said.

“Cash flow is the biggest thing that’s often of concern for small business and using credit cards to pay tax bills is a way that a lot of people are just managing that issue,” O’Neil said.

Shadow treasurer Tim Wilson criticised the federal government for its “double standard and hypocrisy” and joined One Nation Leader Pauline Hanson in calling on them to overturn the ATO’s decision completely.

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“The Albanese government’s war on small business is only accelerating with this decision. It started with a budget that hit small and family businesses with higher capital gains tax on early-stage start-ups and minimum taxes on trusts,” he said on Friday.

“Then the surcharge ban told every café, tradie and travel agent to absorb the cost of card fees. Now the ATO has refused to absorb the same cost itself and pulled card payments for tax bills altogether. 

“There is one rule for Canberra and another rule for the corner store in a community.”