The Australian Taxation Office (ATO) was right to announce it would stop accepting credit card payments. The problem wasn’t the decision. It was the timing.
And now, following significant backlash, the Federal Government has extended the deadline from 30 November 2026 to 30 June 2027.
What was already an expensive transition for taxpayers has potentially become an even more expensive one.
Why stopping credit card payments makes sense
The ATO isn’t a business. It can’t increase its prices to recover merchant fees. The tax payable is the tax payable.
So when credit card surcharges were removed on 1 October 2026, the question became: who should cover the cost of processing those payments?
Previously, taxpayers choosing to pay by credit card paid a surcharge to cover the transaction cost. With that surcharge removed, the cost doesn’t simply disappear.
The ATO estimated that absorbing credit card processing fees could cost approximately $200 million annually.
That’s $200 million potentially funded by taxpayers, including those who never use credit cards to pay their tax obligations.
And who benefits?
Credit card payments can provide additional time to pay and opportunities to accumulate reward points. But those benefits aren’t shared equally across taxpayers.
The ATO has reported that only around 5% of small businesses and just over 2% of individuals paid using credit cards in 2024–25.
Should the remaining taxpayers effectively subsidise the payment preferences and potential rewards of a relatively small group?
We don’t think so.
The original timing was already a problem
The Reserve Bank of Australia announced its card surcharging reforms in March 2026, with the changes taking effect on 1 October.
That provided approximately six months to prepare.
Yet the ATO announced its decision to stop accepting credit cards only shortly before the surcharge ban took effect, initially allowing payments until 30 November 2026.
That left businesses with just two months to adjust.
More importantly, it created a period where credit card payments could be made without the surcharge previously used to recover processing costs.
Based on the ATO’s estimated $200 million annual cost, two months represents approximately $33 million on a simple pro-rata basis.
That isn’t a forecast of actual costs, but it demonstrates the scale of the issue.
And with the September-quarter BAS falling due during that window, businesses had an additional incentive to take advantage of surcharge-free credit card payments.
Better planning could have avoided much of this situation.
Now the Government has extended it to 30 June 2027
On 9 October 2026, the Federal Government announced that the ATO would continue accepting credit card payments until 30 June 2027.
The reasoning? To give small businesses more time to adjust and allow further consultation on alternative payment arrangements.
We understand the concern.
Many small businesses are already under considerable cash flow pressure. For some, credit cards provide valuable short-term breathing room when tax obligations fall due.
Removing that option with limited notice was always going to create difficulties.
But extending the deadline doesn’t solve the underlying problem. It simply delays it, while increasing the cost to taxpayers.
Instead of a two-month transition, we’re now looking at nine months of surcharge-free credit card payments.
Using the ATO’s $200 million annual estimate, nine months would equate to approximately $150 million in processing costs, assuming a consistent payment pattern.
Even excluding the two months already locked in under the original deadline, the extension itself adds at least $117 million.
And the actual cost is almost certain to be higher, as more businesses take advantage of surcharge-free credit card payments while they still can. Some will pay the ATO by credit card for the first time. They are the ones most at risk of being caught out when the transition ends, especially if they haven’t budgeted for it.
The Government has confirmed it will provide transitional funding, with the final cost still to be determined.
And here’s the contradiction.
The original decision was intended to prevent taxpayers from subsidising credit card processing costs.
Now taxpayers will be funding an extended transition period to keep those payments available.
The decision to delay may be politically popular, but it comes at a cost.
A longer deadline isn’t a cash flow solution
There’s a bigger issue here for businesses.
If you’re regularly relying on a credit card to meet your BAS, PAYG or other tax obligations, it’s worth asking why.
Credit cards can be a useful short-term financing tool. But they shouldn’t become a substitute for proper cash flow management.
The tax obligation doesn’t disappear when you put it on a credit card. It simply moves to another creditor, potentially with interest and additional costs if the balance isn’t cleared.
And while the extension provides more time, the ATO’s intention remains to stop accepting direct credit card payments after 30 June 2027.
Third-party payment providers may continue to offer credit card payment options, but these generally come with their own fees and conditions.
Businesses that depend on credit card payments to meet their tax obligations should be using this extension to prepare, not simply postponing the problem.
And the first real test will come quickly. The June quarter BAS is the first one caught by the change. For businesses lodging through a tax agent and also lodging monthly PAYG withholding, it falls due on 25 August 2027, just two days after the July activity statement. Two ATO payments in the same week, without a credit card to push them out, will put real pressure on cash flow.
Businesses that can’t pay will end up on a payment plan, paying the general interest charge. And since 1 July 2025, GIC is no longer tax deductible.
What businesses should be doing now
The extension to June 2027 is an opportunity to strengthen your financial position before the changes take effect.
Start by reviewing your cash flow forecast and mapping out upcoming BAS, PAYG, superannuation and other tax obligations.
Consider what happens when those payments need to come directly from your bank account rather than a credit facility.
If that creates a cash flow shortfall, identify it now.
Review your working capital, debtor collection processes, payment cycles and available cash reserves. If necessary, seek professional advice about financing options or payment arrangements before obligations become overdue.
The goal shouldn’t be to find another way to delay tax payments.
It should be to build a business that can meet its obligations when they fall due.
The right decision, handled poorly
The ATO was right to question why all taxpayers should bear the cost of credit card payments used by a minority.
But the implementation has been disappointing.
First, a late announcement created unnecessary disruption. Now, the extended transition risks adding substantially to the cost that the original decision was supposed to eliminate.
There was a better way. Rather than funding nine months of credit card fees, the Government could have offered a short GIC free period, say the first 30 days a debt is overdue, for the 2028 financial year only. That gives businesses the same breathing room a credit card did, the cost is forgone interest rather than fees paid to banks, and no one subsidises someone else’s reward points.
Businesses deserved more notice, and taxpayers deserve greater accountability over the cost of this extension.
At Next Dimension Accounting, we believe strong cash flow management is fundamental to running a sustainable business.
Cash is the lifeblood of every business. Managing it isn’t a project. It’s the job.
The deadline may have moved to 30 June 2027, but the need to prepare hasn’t.
And another nine months of credit card payments won’t change that.
