The tax office is not the hypocrite here. The surcharge ban is
Business groups say the ATO refusing credit cards while small firms must absorb fees is a double standard. The real asymmetry is in the rule: a monopoly can walk away from cards, a cafe cannot.
When you pay a business by card, the business pays a fee to the card companies. Until this month, Australian businesses could add that fee to your bill as a surcharge. New Reserve Bank rules ban that. The Australian Taxation Office, which collects the nation's taxes, has responded by saying it will stop accepting credit cards from the end of November rather than pay the fee itself.
The tax office is right: it has no prices to bury the fee in, so absorbing it would mean all taxpayers funding the rewards points of those who pay by card. The real double standard is in the ban, which lets monopolies walk away and leaves competitors stuck.
A fee you cannot see is still a fee
Banning a surcharge does not make accepting a credit card cheaper. It makes the cost quiet. The merchant service fee charged to the business does not change when the law forbids printing it on the receipt; what changes is who can see it and who ends up carrying it. From 1 October, Australian merchants can no longer pass that fee to the customer who generated it. They have exactly two options left: fold it into the price everyone pays, or stop taking the card.
The Australian Taxation Office has taken the second option, from 30 November. Business groups are furious. The Australian Chamber of Commerce and Industry’s chief executive, Andrew McKellar, calls it a clear double standard — government telling small business to absorb the hit while the tax office declines to. It is a good line. It is also backwards.
The one merchant that cannot raise its prices
Every other merchant in the country has a lever the tax office does not. A cafe that absorbs card fees can lift the price of a flat white by ten cents and be made whole. That is the cross-subsidy the surcharge ban creates and largely intends: people paying by cash or debit quietly fund the acceptance cost of people paying by credit, and some of that cost funds rewards points on premium cards.
The ATO has no price. The amount owed on a business activity statement is set by Parliament, not by the collector. There is no margin to widen, no basket to reprice, no menu to adjust. The only pocket available is consolidated revenue — which is to say, absorbing the fee would mean every taxpayer, including the ones paying by bank transfer, subsidising the ones paying by card. The ATO said precisely that, and it is right. A tax office that quietly funded credit card rewards out of the revenue base would deserve a far worse headline than the one it got.
And nothing stops the cafe doing what the ATO did. Refusing credit cards is perfectly legal. What stops the cafe is the rival across the road that still takes them. That is the whole asymmetry: under a surcharge ban, the ability to walk away from an expensive payment method is a function of market power. Monopolies can. Competitive businesses cannot. The tax office, which is the most complete monopoly in the economy, walked away within eight weeks.
So the double standard is real, but it is written into the rule, not into the ATO’s conduct. The reform was sold as help for consumers — the Reserve Bank put the saving at about $1.6 billion a year. That figure is a measure of surcharges no longer charged, not of costs no longer incurred. The gap between those two things has to land somewhere, and where it lands depends on who has the power to refuse.
The part of the complaint that is genuine
Strip away the hypocrisy framing and a real grievance remains. Small businesses used credit cards to pay tax as a cash flow tool — settle the bill now, carry it on the card for a few weeks. Losing that is a credit problem, and McKellar is pointing at a sector he says is already dealing with rising costs and a fourth interest rate rise.
But it was never a good instrument. Short-term working capital delivered as a by-product of a payment channel, priced at revolving credit rates, is an expensive and accidental way to run a deferral policy. If the view is that businesses should be able to defer tax when cash is tight, that should be decided openly, with terms and eligibility, rather than left to whichever card a taxpayer happens to hold. Losing a bad instrument is still a loss if nothing replaces it. The answer is a replacement, not a reversal.
The strongest case against me
Here is the serious objection. The ATO is not an ordinary merchant. It is one of the largest payment recipients in Australia, with enormous volumes and correspondingly enormous bargaining power with acquirers. A merchant that size does not have to accept the standard rate. Before declaring acceptance untenable, it could have gone to market and driven the cost down — which is, after all, what the Reserve Bank’s broader reform programme is meant to make possible. Exiting instead of negotiating is the lazy choice, and it hands every other large merchant a precedent and a script.
That objection deserves an answer in the form of numbers, and the ATO has not provided them. But even the cheapest credit card acceptance costs more than a bank transfer, so the question of who pays the difference does not disappear with a better deal. It is distributive, not technical. The tax office answered it in the only direction available to it.
What the forum should actually produce
The ATO has convened a special session of its small business stewardship group. A meeting that produces sympathy and a communiqué is worse than no meeting, because it will be cited as consultation.
Before 30 November, the ATO should publish the merchant fees it paid on credit card transactions in the last financial year, the number and value of those payments, and the acceptance pricing it was offered before deciding to exit. If the cost was genuinely untenable, show the figure; if it was not, the decision needs a different justification.
The Reserve Bank should go further. Having claimed roughly $1.6 billion a year in consumer savings, it should commit now to publishing, at six and twelve months after 1 October, a count of merchants that have stopped accepting credit cards and the change in average merchant service fees. The benefit of this reform was quantified in advance. The cost side deserves the same arithmetic, and the tax office has just supplied the first data point.
What would change this view
If the Reserve Bank publishes data over the next year showing that credit card acceptance among Australian merchants held steady or rose after 1 October, and that average merchant service fees for credit cards fell by broadly the amount surcharges used to cover, my claim that the ban reallocates cost rather than removing it is wrong. Equally, if the ATO publishes its merchant fee bill and it turns out to be trivial relative to the administrative cost of exiting, its decision was about something other than cost.
Either finding would mean the reform is squeezing acceptance costs down rather than shifting them sideways, and the ATO's exit would look like an outlier rather than a leading indicator. I would then argue the complaint belongs to the tax office alone, not to the rule.
Worked from
- ATO convenes snap meeting over credit card ban
ABC News · 2026-10-06