Australian government defends ATO credit card transition after July warning

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ATO credit card transition defended

Highlights

The ATO planned to stop accepting credit card payments from December 1, informing small businesses on September 30 before public disclosure.
Government intervenes after business backlash, underwriting costs so the ATO can keep accepting credit cards until mid-2027.
The ATO faces a $200 million cost from absorbing surcharges after RBA changes on October 1, which annually cost consumers $1.6 billion.

July awareness and policy timeline

As reported by ABC News, Assistant Treasurer Daniel Mulino says the government becomes aware in July that the ATO is considering ending credit card payments and that the agency's preference at that stage is to stop accepting them. He says the government indicates the ATO should keep engaging with card companies and provide a transition period rather than move immediately.

Mulino says allowing credit card payments to continue indefinitely would have serious fiscal ramifications for the budget. He adds that the government intervenes quickly after stakeholder backlash shows the originally proposed transition is not long enough.

The ATO announces in late September that it will stop accepting credit card payments from December 1, after small businesses are informed on September 30, one day before the decision becomes public. Treasurer Jim Chalmers earlier says he is aware the ATO is grappling with the issue before it finalises the decision in late September, although he is not aware of the specific timeline.

Business fallout and cost pressures

The planned change sparks a backlash from the business community, prompting the prime minister and treasurer to underwrite the costs so the tax office can continue accepting credit cards until mid-2027. Mulino says the government responds after feedback from stakeholders makes clear that the grace period is insufficient.

The ATO's position follows Reserve Bank of Australia changes that remove card surcharges from October 1, a move the central bank says is in the public interest and one that costs consumers about $1.6 billion a year. Mulino says he engages with government agencies shortly after the RBA's announcement in March because they are expected to comply with the surcharge changes.

The tax office initially argues it is not tenable to absorb a $200 million cost, saying the expense would reduce revenue collection and leave less funding for government services. Taxation Commissioner Rob Heferen says the ATO would have preferred to continue accepting credit cards, but card companies do not offer a low enough rate.

In our earlier article on Malaysia’s Budget 2027 spending increase ahead of GE16, we explained how federal allocations rose to RM459.8 billion (+9.7% year-on-year) and why outlays often climb around election cycles. We also noted the added cost pressures from items like the new minimum wage policy, tourism programmes, and major event preparations—factors that can complicate fiscal consolidation goals and intensify scrutiny on how governments manage rising operating costs.

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