The federal government has overruled the Australian Taxation Office's controversial ban on credit card payments for tax bills, delaying its start by more than six months and announcing new stopgap funding.
Treasurer Jim Chalmers announced the extra funding on Friday, following days of criticism and calls from small business to halt the ban. The tax office will continue to accept credit card payments via third parties, as well as other free and low-fee payment methods like debit card and bank transfers, from July 2027.
Background to the ban
The decision came after criticism of the ATO's response to the Reserve Bank's moves to ban credit card surcharges, something the federal government sought to take credit for. Tax commissioner Rob Heferen announced moves in early October to stop accepting credit card payments for tax bills from 1 December.
He said continuing to accept card payments would cost the ATO almost $200m a year, as those costs can no longer be passed on to card users. However, some business owners, particularly smaller operators, use credit card payments as a cashflow tool, managing their liabilities by using credit when required. Estimates suggest about 5% of small businesses use credit card payments for tax bills.
Government response and reaction
Because tax liabilities are legislated by federal parliament, the ATO said it could not build card payment costs into charges paid by taxpayers. Government ministers had sought to pressure the ATO into changing its position this week, amid strong criticism from the Coalition and business lobby groups. The ATO is an independent authority and the government cannot direct the tax commissioner's decisions.
Chalmers said the extension would give the ATO time to consult small business to get the policy right. “Now we try not to interfere with the RBA or the ATO when they go about designing and implementing this surcharge ban, but it's really important that we have stepped in today to make it possible for the ATO to continue to take credit card payments until the end of the financial year,” he said.
Opposition leader Angus Taylor urged the government to scrap the ban on credit cards, rather than delay it. “Instead of screwing businesses today, they've decided they're going to screw them … at least in nine months' time,” he told News24. “The prime minister should scrap this treasurer while he's at it, because frankly, this is just another humiliating backdown.”
Business reaction
Australian Chamber of Commerce and Industry boss Andrew McKellar said the delay provides “much needed breathing space for small business”. “It is reassuring to see some sense prevail on the credit card ban for now,” he said. “This is a win for small business and a welcome reprieve, but small businesses remain under significant pressure.”
