Following the recent ban on card surcharges here in Australia, you may have heard that the Australian Taxation Office (ATO) announced plans to stop accepting credit card payments for tax bills from 1 December 2026.
However, since the announcement, the proposal has, unsurprisingly, sparked major backlash from business groups and politicians. Their concern is that businesses are being forced to absorb card processing costs while the ATO is refusing to do the same.
As a result, the federal government stepped in and has pushed the proposed ban back to 30 June 2027 to allow more time for consultation.
If you use credit cards to manage your business’s tax payments, and the ban does go ahead next year, it could affect your working capital and cash flow flexibility. Here’s a summary of what’s going on and the potential impact.
The credit card surcharge change
Since 1 October 2026, businesses are no longer able to add surcharges to payments using debit and credit cards on specified networks, including Visa, Mastercard and EFTPOS.
Previously, you could pass on the cost of processing card payments to customers through a surcharge, as long as it didn’t exceed your cost of accepting the payment.
The Reserve Bank of Australia (RBA) introduced the change to make pricing more transparent and remove unexpected fees at the checkout, potentially saving customers around $1.6 billion a year.
But what about businesses? The cost of accepting credit card payments hasn’t disappeared. Your business still has to pay merchant fees to banks and payment providers.
Increase prices or absorb the cost?
Take a café selling coffee for $5. Previously, a 1.5% card surcharge would have brought the total to approximately $5.08.
With surcharging removed, the café may decide to absorb the fee or increase its advertised price to $5.10 to help recover its card processing costs – meaning customers could end up paying more anyway. The RBA estimates that consumer prices could rise by around 0.1% overall.
Your business may now be facing a similar decision. Do you absorb the card processing costs or adjust your pricing to recover them?
Whatever you decide, the important thing is to understand how these costs affect your margins. Removing the surcharge doesn’t remove the expense. It simply changes how you account for it.
See also: How to maximise profits in your business with cost management
Why the ATO plans to ban credit card payments
Unlike your business, the ATO can’t simply increase its prices to recover card processing costs.
Tax liabilities are set by legislation, so the ATO can’t add an extra amount to your goods and services tax (GST), pay-as-you-go (PAYG) withholding or income tax bill to cover merchant fees.
Previously, taxpayers paying by credit card were charged a processing fee, which varied depending on the card used. With surcharges now prohibited, the ATO estimates continuing to accept credit card payments would cost it almost $200 million annually.
So, rather than absorb these additional costs, the ATO proposed banning credit card payments altogether. The delay now gives the ATO more time to explore alternative arrangements that could address processing costs while allowing businesses to continue paying by credit card.
Using credit cards for ATO payments
For an established business, using a credit card can be a strategic way to manage working capital.
Say your business turns over $4 million annually, with a quarterly BAS liability of $75,000. You’re profitable, but your cash flow fluctuates as customer invoices are paid, major supplier accounts fall due, and payroll commitments continue.
Rather than immediately draw $75,000 from your operating account, you might choose to pay your BAS using a credit card. Previously, assuming a 1% ATO processing fee, the additional cost would be $750.
Depending on the terms of your card, including whether an interest-free period applies to ATO payments, you may then have several weeks before the card payment is due. This could give you time to collect outstanding invoices while keeping cash available for other operating commitments. If the proposed ban goes ahead, you could lose this flexibility.
See also: Financial projections 101: profit and cash flow
What the ban could mean for your business
While only around 5% of small businesses paid tax by credit card in 2024-25, the proposed ban could have a big impact if your business does use this facility regularly.
Here are five areas worth reviewing while the consultation continues:
- Your tax payment strategy –If you regularly use credit cards to pay tax, consider how losing this option could affect your cash position, especially when large business activity statement (BAS) or income tax payments fall due.
- Cash flow forecasting – Review your cash flow forecasts to identify when tax payments coincide with payroll, supplier payments and other commitments. Focus on the timing of cash coming in and going out, not just revenue and profitability.
- Working capital arrangements – Assess whether your cash reserves or existing finance facilities provide enough flexibility. If you’re considering an overdraft or other funding option, compare the costs against your current credit card arrangements.
- Customer payment terms – If outstanding invoices regularly create pressure around tax payment dates, review your invoicing processes, debtor management and payment terms.
- Alternative ATO payment options – Keep an eye on the outcome of the consultation and any changes to payment options. In the meantime, the ATO also accepts BPAY and bank transfers. If you can’t pay a tax liability in full, an ATO payment plan may be available, although interest generally applies.
Reviewing these areas now will help you identify potential cash flow gaps and make adjustments in advance.
See also: The business value of financial forecasting
Frequently asked questions (FAQs)
Can you still pay the ATO with a credit card?
Yes. Following the decision to delay the proposed ban, you can continue paying the ATO directly by credit card at least until 30 June 2027. This extra time allows for further consultation and exploration of alternative payment arrangements. Third-party credit card payment services will remain available beyond this date.
Can you pay your BAS with a credit card?
Yes, you currently can pay your BAS using an eligible credit card. However, if the proposed ban goes ahead, you may need to use another payment method for direct ATO payments from 1 July 2027. Third-party credit card services will still be available.
Will the ATO credit card ban affect debit card payments?
No, the proposed ban only applies to credit cards. You’ll still be able to pay the ATO using a debit card, along with other available payment methods.
What are the alternatives to paying the ATO by credit card?
You can still pay the ATO using BPAY, bank transfers or a debit card. If paying your tax bill in full is going to be difficult, you may also be able to arrange an ATO payment plan. Just keep in mind that interest generally applies to outstanding amounts.
See also: ATO payment plans: the hidden risks and traps that could cost you
Plan before the ban
The removal of card surcharges and the proposed ATO credit card ban may seem like separate changes, but one has led to the other – and both have implications for how you manage business costs and cash flow.
You may need to review your pricing to account for credit card processing costs, while also considering how you’ll manage larger tax payments if direct ATO credit card payments are no longer available.
While the delay offers some breathing space, the proposed ban hasn’t been scrapped. Now’s a good time to review your payment arrangements, understand the potential impact and plan ahead.
