The federal government spoke with three voices on Thursday about the Australian Taxation Office's decision to stop accepting credit cards, a day after the tax office told business groups it would not reverse the ban. From 1 December, a credit card payment to the ATO will fail.
Housing Minister Clare O'Neil said the government had "some real concerns about what the ATO is proposing to do here" and wanted the tax office to "go back and talk to business". Small Business Minister Anne Aly said businesses "were rightly shocked by this decision" and should have been consulted. Assistant Minister Andrew Charlton took the opposite line. "The government supports the ATO's decision," he told the ABC.
The ban follows directly from the Reserve Bank's ban on card surcharges, which took effect on 1 October. Until then the ATO passed its card fees on to taxpayers as a surcharge. Commonwealth agencies had to stop that from the same date, and Commissioner Rob Heferen says the ATO cannot build the cost into its prices because tax liabilities are set by law. He puts the merchant fees at "almost $200 million annually and expected to continue increasing over time".
Heferen said the ATO asked the card companies for a better deal. "To try and reduce the cost we approached credit card companies, however they declined to offer a sufficiently low rate," he said. Absorbing the cost was "not tenable" because it would mean "less funding being available for all government services".
The government says the surcharge reforms will save consumers about $1.6 billion a year and businesses $910 million. Businesses that can no longer surcharge must absorb the fee or lift prices, and some have done the latter: 17 per cent of cafes tracked by the Small Flat White index have raised the price of a flat white since 1 October, typically by 50 cents, the ABC reported.
Business groups argue the ATO is exempting itself from the rule it is enforcing on everyone else. "Government is telling small business to absorb the hit from the surcharge ban and its cost, while the tax office is saying a different set of rules applies to it," Australian Chamber of Commerce and Industry chief executive Andrew McKellar said. Charlton's case runs the other way: "If we're saying that surcharges can't exist in the private sector, then surcharges shouldn't exist in the public sector."
The tax office's own numbers show who uses the option. Credit cards made up 2.3 per cent of ATO collections. About 5 per cent of small businesses and just over 2 per cent of individual taxpayers paid tax by credit card in 2024-25. More than 60 per cent of card payments by value came from privately owned and wealthy groups and from public and multinational businesses.
For a small business that used a card to bridge a tax bill, the fallback is a payment plan, which accrues the general interest charge. That rate is 11.51 per cent a year for October to December. The ATO says payment plans are meant as a short-term measure, not a financing tool. Plans currently linked to a credit card "may move into arrears or default" if they are not changed, and the ATO is writing to those taxpayers.
Independent MP Kate Chaney said removing the option "with around eight weeks' notice makes things harder". The Coalition has called for the ban to be reversed.
The ATO said it would "continue to engage with stakeholders". Card payments remain open, without a surcharge, until 30 November. Unless the government overrules its own tax office before then, they close on 1 December.
