‘It hurts’: ATO credit card ban another hit to small business

“There’s been a couple of different things that have happened over the last year or two. They started off with restricting taxpayers from claiming deductions for general interest charge (GIC) and shortfall interest charge (SIC) incurred on or after 1 July 2025. When you were paying off any of your payment plans that became non-deductible,” Luyten told Accountants Daily.

“That hurt as well.”

Next, Payday Super changed how employers pay their employees’ super guarantee from 1 July 2026, when they are now required to pay employees their super guarantee for each payday (instead of quarterly), and calculate super based on an employee’s qualifying earnings, which, according to the ATO, is a new term that brings together ordinary time earnings and other payments.

“People were paying wages weekly instead of having to come up with their super money every quarter. If they’re paying it fortnightly, they had to come up with that fortnightly. Cash flow becomes critical. That makes a huge difference,” Luyten said.

The latest announcement by the ATO to stop accepting credit cards is another blow for small businesses that may have used credit cards to make their business activity statement (BAS) payments, she said.

“The ATO is saying it’s not going to offer that facility anymore. That hurts,” Luyten said.

“Even if you weren’t paying off your credit card, it gave you maybe another 30 days to then pay that off. It all comes down to cash flow. You have to remember that it wasn’t the government that took away the surcharge. It was the Reserve Bank. The government is saying that they’re not willing to cop the surcharge so they’re going to take it away. Small businesses can’t pass the surcharge on.

“But we’re moving towards a cashless society. So, instead, businesses might just put their prices up. It’s the only way that they’re going to be able to recover those costs.”

Luyten said the ATO’s only recourse would have been to increase their interest rates, but that would not have been feasible.

“People wouldn’t pay anyway, which is happening now. There are more liquidations happening. There are more director penalty notices going out. The small business restructure options are being knocked back more often by the ATO,” she said.

Following the ATO’s credit card ban announcement, Commissioner of Tax Rob Heferen said in a statement that the Tax Office approached credit card companies to try and reduce the cost, but they declined to offer a sufficiently low rate.

He said the costs associated with accepting credit card payments are “significant”, with merchant fees estimated to be almost $200 million annually and expected to continue increasing over time.

When it announced the credit card ban on 1 October 2026, the ATO said that it determined that it was not appropriate for the cost of credit card merchant fees to be transferred to the community.   

However, subsequently, Heferen said: “It is not tenable for the ATO to absorb the costs associated with accepting credit cards on an ongoing basis.

“This would result in less revenue being collected by the ATO and ultimately, less funding being available for all government services. Meeting the cost of surcharges through additional public funding for the ATO would have the same ultimate outcome.”

Shadow Treasurer Tim Wilson has slammed the Albanese government’s “war on small business”, arguing that the changes “double-tap” small business with higher costs.

“Anthony Albanese and Jim Chalmers' assault on small business is designed to feed their rapacious appetite for revenue because the Albanese government can’t kick its spending addiction," Wilson said in a statement to Accountants Daily.

“The ATO sat on this until the very morning the ban started. If the government’s own tax collector can’t absorb the cost, how does the Treasurer expect a family-run cafe to?

"Small business is in the crosshairs, when the government should be backing them in. That's why I want a Small Business Act to make sure these decisions can't be made without consulting small businesses first. We've laid out the framework, and we want to hear from small businesses about what else they want to see."