The Australian government has postponed a planned ban on credit card payments for tax bills until June 2027, responding to opposition from businesses that depend on this payment method for financial flexibility. Treasurer Jim Chalmers made the announcement after concerns arose that the original November 30 deadline would eliminate a key cash flow tool for small businesses already dealing with increased expenses.
This decision follows Australia’s recent elimination of card surcharges on October 1, removing the ability of merchants to add 1% or 2% fees to Visa, Mastercard, eftpos, and American Express transactions. While consumers benefited from the change as a cost-of-living relief measure, businesses now face a new financial challenge: the underlying transaction fees remain in place, forcing them to decide whether to absorb these costs, raise prices, or seek alternative payment methods.
A $5 coffee demonstrates the financial impact. Previously, a café could charge $5 and apply a surcharge to cover processing fees. Now, without that option, businesses must find other ways to offset fees that accumulate quickly. For example, a merchant processing $50,000 in card transactions each month would incur $500 in fees at an average processing rate of 1%. That equates to $6,000 annually, before accounting for other payment-related expenses.
The Reserve Bank’s reforms, which include lower interchange fee caps and greater transparency, aim to promote competition in the payments sector. However, some business operators warn that without surcharges, price increases may become necessary as merchants seek to recover hidden costs. Small businesses, already struggling with higher wages and rent, now face a difficult choice: absorb the fees or pass them to customers.
Businesses fight to keep credit card tax payments
For consumers, the removal of surcharges provided clear benefits. For businesses, the change introduced uncertainty. Many companies use credit cards to manage tax deadlines, treating these payments as short-term loans when cash flow is constrained.
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Sydney-based fintech Pyng Payments is positioning itself as a solution by offering a bank-to-bank payment platform that eliminates traditional card fees. The company’s system allows merchants to accept payments directly from customers’ bank accounts, bypassing the processing infrastructure that drives up costs. Over 200 merchants have already adopted the service, and interest is growing as businesses evaluate their options.
“For years, businesses have been able to pass card processing fees directly on to customers. Now they’re having to look at those costs much more closely and work out whether there’s a better way to get paid,” said Pyng founder Dipra Ray. “A lot of small businesses have simply accepted payment processing fees as a cost of doing business. That’s changing. They’re starting to ask what they’re paying, why they’re paying it and whether there are cheaper alternatives.”
Pyng’s model works by enabling customers to pay directly from their bank accounts, removing the intermediaries that inflate transaction costs. For high-volume merchants, even small fee reductions can result in substantial savings.
New payment models emerge amid fee pressures
Traditional card networks dominate the market, with contactless payments deeply embedded in consumer habits. However, economic pressures are pushing businesses to explore options like real-time bank transfers, which the New Payments Platform supports. The Reserve Bank’s reforms will also introduce further transparency requirements for payment providers, with designated card networks and large acquirers required to begin publishing specified fee information from October 30. Additional disclosure measures will follow in 2027, giving merchants more information about the costs associated with their payment services.
The Australian Taxation Office’s initial plan to block credit card payments for tax bills by November 30 was justified as a cost-saving measure, with the ATO estimating the change would reduce annual processing expenses by approximately $200 million. However, the backlash from small businesses—who often rely on credit card payments as a short-term financing tool—led the government to reconsider. Many operators use credit cards to manage irregular cash flow, particularly when tax deadlines align with periods of low revenue. Without this option, some risk facing liquidity shortages or needing to secure alternative funding at higher interest rates.
