The Australian Taxation Office will stop taking credit card payments from 1 December and has told business groups it won’t reverse the decision, after the tax commissioner called a snap meeting over the backlash. Cards will still be accepted until 30 November, and after that anyone settling a tax debt has to have the money there in cash or on debit.
ABC News reported that Australia’s tax chief convened the forum with business groups on the morning of 7 October, in the wake of widespread anger at the move. The ATO indicated it wasn’t going to shift, according to a spokesperson from the Australian Chamber of Commerce and Industry, which was in the room.
“We will continue to seek to have the ban overturned,” the ACCI spokesperson said.
The ABC reported it had approached the ATO for comment, and said it understood business groups left the meeting frustrated, with no clarity on who made the call to end credit card payments, or when.
”A clear double standard”, business groups say
The sting for small operators is the timing. Since 1 October, the Reserve Bank’s reforms have scrapped card surcharges, which the RBA said was “in the public interest” and would save customers about $1.6 billion a year. So a builder can no longer pass the card fee to the client who taps for the job, while the tax office has decided it won’t wear the same fee on the way in.
ACCI chief executive Andrew McKellar put it bluntly before the meeting.
“There is a clear double standard here. Government is telling small business to absorb the hit from the surcharge ban and its cost, while the tax office is saying a different set of rules applies to it,” he said.
“Small business is the backbone of the economy. They are doing it tough, with rising costs and a fourth interest rate increase last week.”
The Council of Small Business Organisations Australia said the decision “warrants a rethink”, but argued the bigger problem sits upstream. “However, the broader issue remains the card surcharge ban itself,” it said in a statement, raising concerns about whether small businesses can carry the cost at all.
“If absorbing the cost of accepting credit card payments is not sustainable for a government agency, it is difficult to expect small businesses already operating on tight margins to simply absorb those costs themselves.”
Master Builders chief executive Denita Wawn said the surcharge ban and other regulatory decisions had been made “without consultation” and showed a “lack of practical understanding of the impact of decisions being made by this government”.
“It’s quite incredulous,” she told the ABC’s News 24. “Who would want to be a small business operator in this country at the moment?”
“Who would want to be a small business operator in this country at the moment?”
Australian Retail Council chief executive Chris Rodwell also wants the tax office to think again. “Removing credit card payments will disrupt how some small businesses manage their cash flow at an already difficult time,” he said. “Small businesses deserve a fair go. If they are expected to wear these costs, so should the tax office.”
Opposition Leader Angus Taylor called on the government to instruct the ATO to reverse course, saying: “The hypocrisy of this government knows no bounds.”
The ATO’s numbers
The tax office has stood on the maths. Credit cards make up just 2.3 per cent of payments made to the ATO, and merchant fees on them are estimated at almost $200 million a year, taxation commissioner Rob Heferen said in a statement on 2 October.
“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,” Mr Heferen said.
“It is not tenable for the ATO to absorb the costs associated with accepting credit cards on an ongoing basis.”
The ATO said it would have preferred to keep taking cards but credit card companies declined to offer a rate low enough, and that absorbing the fee would mean less revenue collected and less money for government services.
It also pushed back on the idea that this is mainly a small business issue, saying “more than 60 per cent of credit card payments by value were made by privately owned and wealthy groups, and public and multinational businesses”, with about 5 per cent of all small businesses using credit cards to pay their taxes.
What it changes for a subbie paying a BAS
For the one in twenty small businesses the ATO says uses a card, the card wasn’t about points. It was a bridge. A subbie who’s invoiced a head contractor and is still waiting on the progress claim could put the quarterly bill on plastic on the due date, then square the card off when the money landed. That’s the exact use the business groups are defending: small business owners told the ABC they had lost the option of using credit card payments to the ATO as a cash flow method.
From 1 December that bridge is gone. The cash has to be in the account on the day. Some operators told the ABC they feared they would have to source money quickly to start paying by debit, or go into arrears with the tax office, and that arrears could trigger enforcement against the business, up to and including closure.
It’s a bigger deal for anyone running retentions and 30-day-plus payment terms, which is most of the contracting chain. Your tax deadline doesn’t move when the head contractor’s payment schedule does.
What to watch
ACCI has said it will keep pushing for the ban to be overturned, so the next thing to look for is whether that pressure shifts the commissioner or produces a ministerial direction. The other thing to watch is the spread. Other outfits have signalled they’ll stop taking credit cards too, including StrataPay, some private schools, local councils and rental payment platforms, which means more of the fixed monthly outgoings a small builder runs through a card are moving to debit at the same time.
If you’ve been timing your tax payments around a card statement, the practical move is to work out now where November’s and December’s cash is coming from, not on the last day of the month.
Frequently asked questions
When does the ATO stop accepting credit card payments?
Cards will still be accepted until 30 November. From 1 December, tax debts have to be paid in cash or by debit.
Why is the ATO ending credit card payments?
Taxation commissioner Rob Heferen said merchant fees on credit cards cost the ATO almost $200 million a year, even though cards make up just 2.3 per cent of payments it receives.
Will the ATO reverse the decision?
The ATO indicated at a snap meeting with business groups on 7 October that it won’t budge. The Australian Chamber of Commerce and Industry says it will keep pushing to have the ban overturned.
How does this affect subcontractors who use a card to manage cash flow?
Some subbies have used a credit card to cover a tax bill while waiting on a progress claim, then paid the card off once the money landed. From 1 December that option is gone, and the cash has to be in the account on the day the tax is due.
Sourced from ABC News. Original article.
