ATO delays credit card ban as government backs down after business backlash

The Australian Taxation Office (ATO) will delay the implementation of its controversial credit card ban until the end of the financial year, according to the ABC News. The decision comes after the government agreed to temporarily cover the cost of card surcharges, following pressure from businesses. The ATO had justified the move by saying it would cost $200 million a year to absorb the fees. However, only 5 per cent of small businesses use a credit card to pay their tax bill, as reported by the ABC News.

The ATO announced last week it would stop accepting credit card payments for tax bills from December in response to the Reserve Bank's ban on surcharges. However, the decision sparked widespread backlash from small businesses, with several Albanese government ministers also raising concerns about the impact of the ATO's ban, as reported by the ABC News.

The government said the ATO had explored a number of options, including engaging with credit card companies to negotiate lower fees, but was unsuccessful, according to the ABC News.

Treasurer Jim Chalmers said the government was aware the tax office was 'grappling' with the issue before it made the decision in late September, but did not know the specific timing, as reported by the ABC News.

The treasurer said the government insisted on a transition period and the ATO initially landed on a two-month period, with the ban to take effect in December, as reported by the ABC News.

The decision to delay the credit card ban has been welcomed by small businesses, who had been critical of the ATO's initial decision, as reported by The Guardian.

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, as reported by The Guardian.

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, as reported by The Guardian.

The tax commissioner, Rob Heferen, announced moves in early October to stop accepting credit card payments for tax bills from 1 December, as reported by The Guardian.

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, as reported by The Guardian.

The ATO is an independent authority and the government cannot direct the tax commissioner's decisions, as reported by The Guardian.

Chalmers said the extension would give the ATO time to consult small business to get the policy right, as reported by The Guardian.

The treasurer said the government had stepped in to make it possible for the ATO to continue to take credit card payments until the end of the financial year, as reported by The Guardian.