ATO delays controversial credit card payment ban after backlash from small businesses

The Australian Taxation Office’s credit card payment ban has been delayed after the federal government negotiated a year-long transition period with the independent agency.

Treasurer Jim Chalmers will provide “transitional funding” to the ATO to help manage the transition. “Australian small businesses have said the ATO’s announced timeframe was inadequate and we have taken these concerns seriously and acted on them,” Chalmers said in a joint statement with Small Business Minister Anne Aly and Assistant Treasurer Daniel Mulino.

“Labor will always back small businesses because we know how important they are to our economy.

“This will provide more time for the ATO to engage with small business and other taxpayers who currently rely on credit cards, provide more detailed information to those affected, and consult on targeted options to support impacted taxpayers.

“As part of this, the government has asked the ATO to consult on how best to support those experiencing financial hardship and identify alternative arrangements for businesses and individuals that are unable to pay via other methods.”

The ban was originally due to take effect on November 30, following the introduction of a ban on credit card surcharges on October 1.

The tax office said the decision was aimed at ensuring all taxpayers were not left footing the bill for credit card processing fees, arguing the ongoing costs would ultimately reduce the funding available for government services.

“It is not tenable for the ATO to absorb the costs associated with accepting credit cards on an ongoing basis. This would result in less revenue being collected by the ATO and, ultimately, less funding being available for all government services,” the agency said.

The ATO’s decision sparked fierce backlash from small business owners, business groups and MPs, who warned the move could put further pressure on businesses relying on credit cards to manage cash flow.

Financial expert Christian Bayliss told Sunrise that credit cards can act as a short-term working capital facility for small businesses, allowing them to access several weeks of interest-free credit.

He warned the loss of that option could put additional pressure on businesses already struggling financially.

The ATO had planned to continue accepting payments through direct debit and BPAY from debit and cheque accounts, as well as cash and EFTPOS payments at Australia Post offices.

The agency said credit card payments accounted for 2.3 per cent of all tax payments.

The ATO did not immediately reply to 7NEWS.com.au’s request for comment.