‘A big slap in the face’: Accountant blasts ATO credit card ban

“It’s good enough for the business owners to [absorb the costs] but not good enough for the ATO.”

According to Lennon, the majority of business owners use credit cards to pay their ATO debts to create breathing room with their cash flow.

“Small businesses are already struggling. It was a huge blow to everyone who’s trying their best to keep their heads above water. Now they’re slapped with another thing that they’ve got to deal with. It just seems never ending,” Lennon said.

Following the Reserve Bank of Australia’s review of merchant card payment costs and surcharging, the ATO announced on 1 October 2026 that it will stop accepting credit cards as a payment method after 30 November 2026.

It said that it would be inappropriate for the ATO to transfer the costs of credit card merchant fees to the community. Commissioner of Taxation Rob Heferen said the costs of accepting credit card payments are estimated to be $200 million annually in merchant fees and are expected to rise over time.

However, just eight days later, the government announced that it had stepped in to provide an extension and that the Tax Office will continue to accept credit cards until 30 June 2027.

“Australian small businesses have said the ATO’s announced timeframe was inadequate and we have taken these concerns seriously and acted on them,” Treasurer Jim Chalmers said.

Heferen said the ATO approached credit card companies in an attempt to reduce the cost of accepting credit cards, but they declined to offer a sufficiently low rate.

Lennon questioned why the government did not approach the companies initially before this change was announced.

“I get the argument that we want it to be a sticker price but all around the world the sticker price is never the price,” she said.

“I just got back from the US where you pay the fee, sales tax, and a tip. Why are we so hell-bent on changing what we’re doing to be different from the rest of the world at the expense of the small-business owner and consumer? Inflation will rise because the prices are going up.”

Lennon accused the government of “gaslighting” the community into believing that removing credit card surcharges would lower the cost for small businesses and consumers.

“But this is not the case. They’re just moving the chess pieces around the board,” she said.

“I think a lot of accountants are watching all of this unfold and asking if the government has any clue what they’re doing. They’re saying things are going to be cheaper but small businesses and consumers are paying for it.”

The eight-day backflip and the extension of the time frame for accepting credit card payments until July 2027 indicate a lack of consultation, Lennon said.

“It’s exhausting. It feels like we’ve got whiplash. Once again, it’s an example of the government rolling things out without consultation and thinking things through and then having to quickly put a band-aid on it,” she said.

“Now we’ve got more uncertainty for small businesses. There are so many things up in the air right now, including the proposed discretionary trust and capital gains tax changes. For a government that’s supposedly making things easier and simpler, they’re doing the opposite.”

Heferen said that around 5 per cent of all small businesses used credit cards to pay their tax obligations in 2024–25, while credit card payments represent only 2.3 per cent of total ATO collections.

When asked if she believes these figures were accurate, Lennon said she does not think so, adding that around 70 per cent of her small business clients use credit cards to fulfil their tax obligations.

Accountants Daily asked the ATO to provide details on how it determined the proportion of small businesses that use credit cards for their tax obligations and whether it had underestimated the impact of its decision on small businesses.

While it did not provide details on how it arrived at its figures, a spokesperson told the brand: “While we acknowledge that some tax professionals may have a different perspective based on the payment methods used by their particular clients, we confirm the figures in the ATO’s statement are accurate and reflect taxpayers’ usage of credit cards.”

According to media reports, Assistant Treasurer Daniel Mulino admitted that the government knew about the ATO’s intentions in July, despite small businesses only being made aware in late September.

Accountants Daily approached the ATO to confirm if it had informed the government of its preferences in July, but it did not respond to this question or whether it consulted with the small-business community and accountants before announcing the change.

Lennon suggested that accountants work with their small-business clients and examine their margins to determine if the client should raise their prices.

“It depends on the business. Some businesses can afford to switch off credit cards altogether, but others, like coffee shops, can’t stop taking credit cards or they’ll go broke and customers will go elsewhere,” she said.