Pauline Hanson demands the ATO reverse its credit card ban

What the ATO actually said

The tax office put out its statement just after midnight on Thursday 1 October, the same day the surcharge ban kicked in. It was short. “Following the Reserve Bank of Australia’s Review of Merchant Card Payment Costs and Surcharging, the ATO will stop accepting credit cards as a payment method after 30 November 2026,” it said.

Then came the reason. “As a government agency, the ATO has decided it would not be appropriate for the cost of credit card merchant fees to be transferred to the community.”

Here’s what that means in plain terms. Every time a business or a government agency takes a card payment, the bank or payment company processing it charges a fee. Until this week the ATO passed that fee straight back to you. If you paid your tax by credit card, you paid a surcharge on top, somewhere between 0.94 per cent and 2.03 per cent depending on the card, according to SmartCompany. Now surcharges are gone. If the ATO kept taking credit cards, it would have to swallow those fees itself, and since the ATO is funded by taxpayers, every taxpayer would be picking up part of the bill for the minority who pay on credit.

The ATO also gave numbers. About 2.3 per cent of tax payments were made by credit card in 2024-25. More than 60 per cent of those card payments came from what it described as privately owned and wealthy groups and public and multinational businesses. In other words, the tax office’s case is that most of the money going through credit cards isn’t coming from the corner cafe.

It did acknowledge the other side. “The ATO recognises that some taxpayers currently rely on credit card payments to manage their tax payments and understands this change may require some adjustments,” the statement said. It said it’ll write directly to people who’ve got a payment plan linked to a credit card, and that anyone with a direct debit drawn on a credit card will need to change it before their next instalment due after 30 November. Responding to angry Facebook users on Thursday, the ATO went further and conceded the change “could make managing your cash flow harder”, SmartCompany reported.

You’ll still be able to pay the tax office by direct debit or BPAY from a debit or cheque account, and by cash or EFTPOS at an Australia Post outlet, 7NEWS reported. The ATO points people to its how-to-pay page and its general line, 13 11 42.

Hanson’s case

Hanson put out a statement and a short video on her Please Explain channel. The video’s description is blunt. “The Prime Minister and Treasurer don’t know and don’t care how small businesses work. The ATO decision to stop credit payments must be overturned.”

Her statement, as reported by The Epoch Times and the Sydney Morning Herald, made three points. The first was about cash flow. “Credit helps businesses manage cash flow and meet tax obligations on time,” she said. “Removing this option will drive businesses to the wall when they are already doing it tough.”

The second was about fairness. “The government can’t impose payment costs on small businesses while allowing the tax office to avoid them,” she said. The Herald carried a sharper version of the same point. “Businesses are expected to absorb these fees, while the ATO avoids them by withdrawing credit-card payments.”

The third went after the government’s sales pitch for the surcharge ban. “The Prime Minister and Treasurer promised Australians a cheaper coffee. Instead, it’s more expensive than the old surcharge while small business is going to be squeezed by the ATO,” she said. “The ATO must reverse this decision immediately.”

That coffee line is a claim, not a measurement. There’s no official data yet on what’s happened to prices in the first few days of the ban. What there is, is a lot of anecdote and a forecast. The Reserve Bank expects businesses to fold card costs into their sticker prices and has put the effect on overall prices at around 0.1 per cent, the Herald reported.

It’s a familiar pattern for Hanson this week. On Tuesday she’d called on Treasurer Jim Chalmers to resign after the fourth rate rise of the year, when the Reserve Bank lifted the cash rate to 4.60 per cent. The ATO decision gave her a second cost-of-living fight with the same opponent, and this one comes with a deadline voters can see on the calendar.

The unusual company she’s keeping

Allegra Spender isn’t a natural ally. The Wentworth MP sits with the Community Strong independents and doesn’t share much of One Nation’s platform. But on this one she landed in almost exactly the same place, and she got there first thing on Friday morning on breakfast television.

“I used to run a small business,” she told Sunrise. “I know how hard it is. I’m hearing that all the time from people in my community who are small businesses. And it’s particularly cash flow that is really hard to manage. So this is where I think the ATO should reverse this.” She said she’d write to the tax office that day.

She also called the decision “a bit rich”, 7NEWS reported, and pointed out that small businesses often pay higher card fees than big ones. But Spender added a note of caution that Hanson didn’t. There are real costs in moving money through banks and card networks, she said, and simply banning banks from charging fees wouldn’t fix it, because they’d “find another place to charge it”.

Jane Hume was on the same Sunrise segment. “The Coalition is calling on the government to reverse this change that the ATO is imposing on small businesses because, quite frankly, it’s been very clear that this government doesn’t understand small business, and it’s imposing unnecessary costs on them,” she said.

Hume said businesses use credit cards “legitimately so that they can smooth out their tax payments over time”. She called the ATO move “the straw that will break the camel’s back” and accused Anthony Albanese of “taking Australians for mugs” over the surcharge ban. “He promised them that this would mean that they pay less when they check out, but that’s not the case,” she said. “Just because that cost isn’t on the receipt, doesn’t mean it doesn’t exist.”

Asked whether the Coalition would rather banks absorbed more of the cost, Hume didn’t give a straight answer. “There must be a compromise position here,” she said, according to SmartCompany. “It can’t all be, you know, pushed down to small businesses.”

Angus Taylor went for ridicule. “On the day that [Labor] impose these surcharges on small businesses, has decided that the ATO won’t take credit card payments because they don’t want the surcharges. I mean, seriously, you couldn’t make it up,” he said, as quoted by the Herald. Shadow Treasurer Tim Wilson told ABC radio’s AM he’d heard from “many small business owners who are absolutely livid”. “They’ve already had to absorb the cost of Payday Super around their finance and this is just a double blow,” he said.

So Hanson, Spender, Hume, Taylor and Wilson all want the same thing. What they don’t share is a plan for who pays the fee instead. Hanson’s statement didn’t say. Hume said there must be a compromise. Spender said the banks would find a way to charge it somewhere. That gap matters, and it comes up again below.

The government’s answer

Tim Ayres, the Industry Minister, defended the tax office on News24 on Friday. He didn’t blame the surcharge ban. He blamed the card companies.

“The credit card companies are charging too much, and that is a charge, ultimately, on the taxpayers because the ATO has to pay it. It’s a charge on Australian taxpayers. It’s not the right thing to do,” he said, as reported by the Herald. “There are alternative ways of paying, and the ATO will work through that with their customers and their stakeholders.”

That’s the government’s line in a sentence. Credit card fees are too high, the ATO shouldn’t pay them with public money, and there are other ways to pay tax. Treasurer Jim Chalmers, Assistant Treasurer Daniel Mulino and Assistant Minister Andrew Leigh had already put out a joint statement on the surcharge ban itself. “Australians will be able to use debit and credit cards without being penalised or surprised at the checkout thanks to these reforms,” they said.

The government says the ban will save Australians $1.6 billion a year in surcharges. It also says the changes to the fees behind the scenes, explained below, will save businesses $910 million a year, SmartCompany reported.

Who’s actually affected

If the ATO’s numbers are right, most taxpayers will never notice. About 2.3 per cent of tax payments went through credit cards in 2024-25. That’s roughly one payment in 43.

But the people who do use cards tend to use them for a reason. Belinda Raso, an accountant, told AM she’d been flooded with calls and messages. “This announcement just came out of nowhere. This honestly feels like the nail in the coffin,” she said. “It’s quite common practice for small businesses around the country with their cash flow needs to actually just get out a credit card, pay that GST bill, pay their BAS and then pay it off.”

BAS is the business activity statement, the regular form businesses use to report and pay GST and other taxes. Paying it on a credit card gives a business up to a few weeks of interest-free breathing room before the card bill comes due. For a business waiting on its own customers to pay, that gap can matter.

Raso’s main complaint was the notice period. She said 12 months would have been more appropriate than two. “It is not enough time for people to organise themselves,” she said.

Andrew McKellar, chief executive of the Australian Chamber of Commerce and Industry, used the same word Spender did. “It is hypocritical for the tax office to be saying this,” he told AM. “They are expecting that small businesses should seek to absorb the cost from not being able to pass through these surcharges that come from credit cards. But they’re saying on the other hand they will not absorb it themselves.” The chamber wants the decision reversed.

There’s another group the ATO’s numbers point to, and it draws less sympathy. SmartCompany noted that some of the anger comes from people who pay big tax bills on credit cards to collect reward points, not because they’re short of cash. If the ATO absorbed card fees so those people could keep earning points, the cost would land on everyone else. It’s one reason the tax office singled out wealthy groups and big companies in its statement.

The tax office’s point about wealthy groups and multinationals is worth reading carefully, though. It says those groups made more than 60 per cent of card payments. It doesn’t say what share of individual card users are small businesses or sole traders. A business that pays one large BAS bill on a card each quarter would be a small number of payments but could be a big share of the people who’d be hit. The ATO hasn’t published that breakdown.

How the surcharge ban works

To understand why the ATO moved, you have to understand what changed on Thursday. Until 30 September, a business could add a surcharge for card payments, as long as it wasn’t more than its cost of taking the card. From 1 October, it can’t.

Strictly speaking, the Reserve Bank didn’t ban surcharges itself. It removed its own rule that stopped card networks from banning them. The three networks it regulates, eftpos, Mastercard and Visa, then each brought in their own no-surcharge rules from 1 October. American Express and UnionPay have done the same, and PayPal’s rule starts on 5 October, according to the RBA. The Reserve Bank’s own explainer says plainly that businesses “will still incur costs when accepting card payments” and that those costs “can be reflected in a business’s overall pricing”.

The RBA has also cut the fees that sit underneath. The biggest piece is interchange, the fee a shop’s bank pays to the cardholder’s bank on every transaction. From 1 October, the cap on interchange for everyday consumer credit cards issued in Australia fell to 0.3 per cent. The cap for debit and prepaid cards is now 8 cents, or 0.16 per cent. The cap for commercial credit cards, the kind many businesses use, stays at 0.8 per cent. Foreign-issued cards get a 1 per cent cap from 1 April 2027.

That last detail matters for the ATO argument. A business paying its tax on a company credit card is often using a commercial card, and the interchange on those is still capped at a higher rate. The RBA didn’t lower it. So the fee the ATO would have to absorb on a business’s tax bill can be higher than on an ordinary shopper’s tap at the supermarket.

There’s more to come. From 30 October, the card networks and big payment processors have to start publishing what they charge. From 30 January 2027, large processors have to show how the cuts to interchange have flowed through to the fees merchants actually pay. And from 1 April 2027, businesses get more detailed statements. The RBA’s pitch is that more transparency will push fees down over time.

The RBA is also clear that businesses can still stop taking cards altogether, or offer a discount for paying another way. That’s essentially what the ATO has done. It’s a merchant, in the RBA’s language, and it’s chosen to drop a payment method rather than eat the cost.

Can the ATO just add a fee back?

Not easily. SmartCompany pointed out a basic problem. Tax and super debts are set by law. Without a change to legislation, the ATO can’t simply add an extra charge to someone’s tax bill because they chose to pay by credit card. Under the old system the surcharge was a separate fee charged by the payment processor. Under the new card network rules, that surcharge is gone.

So the choices are narrow. The ATO could keep taking credit cards and absorb the fees, which means the public pays. It could stop taking credit cards, which is what it’s announced. Or the government could change the law or strike some special deal with the card networks. The RBA’s explainer says any exemptions from no-surcharge rules are “a decision for each card network, not the RBA”.

None of the people demanding a reversal has spelled out which of those they want. Hanson’s statement said the ATO must reverse its decision. It didn’t say whether that means taxpayers should cover the card fees, or the banks should waive them, or the law should change. Hume’s “compromise position” didn’t fill that in either. That question applies to all of them, and it’s the one the ATO will put back to anyone who writes to it.

What the experts say about the ban

Finder surveyed economists and industry experts for its cash rate survey this week, and most were neutral or mildly positive on the surcharge ban, Yahoo Finance reported. Few thought it’d change much.

“The merchants will increase their prices, and the credit card companies will increase their fees and reduce their points,” said Noel Whittaker, an adjunct professor at QUT. AMP chief economist Shane Oliver kept it short. “There is no such thing as a free lunch.” He added, “Removing fees will just lead to higher prices/lower card benefits.”

Others pointed to the upside. You won’t get a surprise fee at the checkout any more, and the price on the shelf is the price you pay. That was the whole reason for the review in the first place. People were fed up with hidden card fees.

For the tax office, though, there is no shelf price to raise. It can’t put up the price of tax. That’s the bind, and it’s why the ATO went for the one lever it had.

The politics

This one plays straight into One Nation’s pitch. Hanson spends a lot of time on small business and cost of living. In September she toured a Wagga factory and talked about local jobs, as reported in her visit to Flip Screen. Her party’s super plan, letting people take three percentage points of their super guarantee as pay, is pitched at the same households, as reported in One Nation’s super guarantee plan. A tax office that tells small businesses to absorb card fees while refusing to absorb them itself is an easy target for that message.

It also gives Hanson something she doesn’t often get, which is respectable company. Business groups, a teal MP and the Coalition all said much the same thing on the same day. That makes it harder for Labor to wave her criticism away as populist noise.

But it cuts the other way too. The ATO’s case is simple. Most card payments come from big and wealthy taxpayers. If the tax office absorbed card fees for everyone, ordinary taxpayers would be subsidising the reward points of people paying large bills on premium cards. Ayres and the government will keep making that argument, and it’s one voters can understand.

And Labor’s broader bet is that the surcharge ban stays popular. Few people liked paying an extra 1.5 per cent to tap their card at the pub. If prices creep up slightly and quietly, the government is betting most people won’t trace it back to the ban. If the ATO change bites hard on small businesses at the end of November, right before Christmas, that bet gets harder.

What happens next

The deadline is 30 November. Until then, the ATO is taking credit cards with no surcharge at all, which means it’s absorbing the fees for the next eight weeks. After that, anyone who usually pays on a credit card needs another way to pay.

If you’re one of them, the ATO says it will write to you if you’ve got a payment plan linked to a credit card. If you’ve got a direct debit drawn on a credit card, you’ll need to change it before your next instalment due after 30 November. The ATO says it’ll keep supporting people in financial hardship and that you can call 13 11 42 or talk to your tax agent.

Spender’s letter is due to reach the tax office in the next few days. Hanson has said what she wants. The Coalition has said what it wants. The government has said it’s not the ATO’s job to pay the card companies. Unless one of those positions moves, the change goes ahead on 1 December, and the first big BAS deadline after it will show whether the tax office or its critics read small business better.