Businesses should not absorb merchant fees, accountant says

“Most of my clients don’t have that much fat in their profit line, to be honest. Some businesses are definitely going to put their prices up. Expenses flow through in every other industry like insurance and banking. It also flows through for small businesses, which means it’ll flow through to the consumer.”

Hodkinson remarked that the surcharge ban has occurred while there has been a concerted effort in the past decade to “march” towards a cashless economy, “which I imagine has suited the ATO just fine”.

“Electronic transactions have the wonderful habit of leaving an electronic trail. Cash is a little old-fashioned. It tends to keep its opinions to itself,” he said.

While businesses will not be able to surcharge card payments, Hodkinson said they could still offer discounts for cash and other payment methods.

“I suspect we might start seeing a few more variations of $101.50 for card payments or $100 for cash as an example,” he said.

“That’s not a card surcharge. That’s a cash discount, which is completely different. So, we’ve got more cash or higher prices. Neither is necessarily catastrophic, but perhaps not quite the victory the announcement makes it sound like. Merchant fees haven’t been abolished. We’ve just abolished the line on the receipt telling you about them.”

Chartered accountant and accounts receivable intelligence platform ezyCollect by Sidetrade co-founder Raj Kuckreja said small business owners that currently pass its card acceptance costs directly to the customer will need to rethink how it recovers that cost.

“Broadly, the choices are to increase overall prices; absorb the cost as part of doing business; or encourage customers towards lower-cost payment methods,” he said.

 “The difficulty is that businesses cannot necessarily just increase prices immediately. Businesses are very conscious of doing anything that may upset customers, reduce spending or customer retention.”

Earlier this year, the RBA concluded that it is in the public interest to remove surcharging for all designated card networks (eftpos, Mastercard and Visa) from 1 October 2026.

In response, the ATO this week announced that it would no longer accept credit cards as a payment method after 30 November 2026. It said it would not be appropriate for a government agency like the ATO to transfer the cost of credit card merchant fees to the community.

ATO credit card ban puts more pressure on businesses

The Council of Small Business Organisations Australia (COSBOA) said that while the ATO’s move might affect a relatively small proportion of small businesses, that would not lessen the impact for those businesses relying on credit cards to manage cash flow and meet their tax obligations.

“For those businesses, this removes an existing payment option at an already pressured time when many are managing high costs, tight margins, and competing financial commitments,” COSBOA CEO Skye Cappuccio told Accountants Daily.

Businesses that need to find an alternative payment method could incur additional financial costs depending on their circumstances, as well as the administrative burden of changing existing payment arrangements, she added.

“Our key concern is the impact on businesses that have been relying on credit cards to manage their obligations, particularly those with payment plans,” Cappuccio said.

“The ATO must take a practical and flexible approach as the change is implemented so businesses acting in good faith are not unnecessarily disrupted or penalised while moving to another payment method.”

The ATO should also move as quickly as possible to implement New Payments Platform payment options, she said.

Accountants could help affected clients, Cappuccio said, by identifying payment arrangements that need to change, understand the cash flow implications, and update payment methods before the new arrangements come into effect.

“Where a business may have difficulty meeting an obligation, early engagement with the ATO will also be important,” she said.

CPA Australia tax lead Jenny Wong encouraged businesses that may be impacted to 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.

“It is important that taxpayers experiencing genuine financial difficulty continue to have access to practical support, including payment plans, so they can remain compliant without placing unnecessary strain on their business cash flow,” Wong told Accountants Daily.

Chartered Accountants Australia and New Zealand (CA ANZ) group executive, policy and international, Geraldine Magarey said the ATO’s decision “highlights the practical consequences of the surcharge ban”.

"With cash now accounting for a relatively small share of consumer payments, businesses offering card payments will need to absorb processing costs into their pricing, rather than charging a separate surcharge,” Magarey told Accountants Daily.

“While card users may see little change at the checkout, customers paying by cash or direct credit could ultimately end up paying a higher price than previously." 

She also pointed out that some small businesses that use credit cards as a way to manage cash flow may be impacted.

“If suppliers stop accepting cards, those businesses will need to have funds available when payments are due,” Magarey said.

An ATO spokesperson told the brand that the Tax Office will work with a small business or their tax adviser to identify available support, including payment plans if appropriate.

“Payment plans are intended as a short-term measure to help taxpayers get back on track with their obligations, not as a long-term cashflow management or business financing tool,” the spokesperson said.

“We remain committed to providing help and support to those who genuinely need it, and we encourage taxpayers who need help or more time to pay to reach out to the ATO or their tax professional to discuss their situation as early as possible.

“The ATO works with taxpayers to establish payment plans that are affordable, sustainable and tailored to their circumstances, while supporting a return to ongoing tax compliance.”