Albanese government partially retreats on credit card issue after small business revolt

The Albanese government has made a partial retreat on the controversial move by the Australian Taxation Office (ATO) to ban businesses from using credit cards to pay their tax bills.

After a backlash from many small businesses, which complained they needed the option to manage cash flow problems, the government announced on Friday it had “stepped in” to delay the ban until June 30 next year.

This would “ensure a longer transition period before the ATO phases out credit card payments”. During this time, the ATO will explore options to assist small businesses with issues about the arrangements for meeting their tax bills.

The ATO ban, which had been due to start December 1, arose from the Reserve Bank’s prohibition – in the name of transparency – on businesses imposing surcharges on payments made by card.

Some businesses will now just include the amount of the surcharge in a price rise for their products or services. But the ATO could not bear the cost of processing cards (nearly $200 million a year), so it imposed the ban.

Treasurer Jim Chalmers spoke to AT0 Commissioner, Rob Heferen, early Friday morning to tell him of the governemnt’s decision.

The intervention followed previous confusion when ministers gave conflicting indications about whether the ATO ruling was likely to be changed.

Initially the government thought it could ride out the backlash because only a small proportion of businesses use cards to pay tax. Just over 2% of individuals and about 5% of small businesses paid tax via credit card in 2024–25, according to the ATO.

But with criticism mounting, the opposition exploiting the issue and with parliament resuming next week, it was decided to seek to defuse the issue.

Chalmers said in a joint statement with Assistant Treasurer Daniel Mulino and Minister for Small Business Anne Aly: “Small businesses have said the ATO’s announced timeframe was inadequate and we have taken these concerns seriously and acted on them”.

The government will provide funding for the ATO to accept credit cards until the end of the financial year. The cost of this will be included in the budget update due in December.

The ministers said the delay would give more time for the ATO to talk with small business and others affected. The ATO would “consult on targeted options to support impacted taxpayers”.

“As part of this, the government has asked the ATO to consult on how best to support those experiencing financial hardship and identify alternative arrangements for businesses and individuals that are unable to pay via other methods.”

The ministers said that in response to the Reserve Bank’s decision on surcharging, the ATO had explored various options “including engaging with credit card companies to seek lower fees. The credit card companies did not offer sufficiently low fees to enable the ATO to continue to accept credit cards. The ATO will continue to engage with card companies on this matter.”

The ministers said that after June 30 next year, the ATO will continue its present practice of accepting credit card payments via third parties as well as other free and low-fee payment methods such as debit card and bank transfer.

Opposition leader Angus Taylor said the government’s announcement did not go far enough. He told News24:“They shouldn’t just delay the ban on credit cards. They should scrap it instead of screwing businesses.”