Australia Tax Update: ATO Chief Admits Jumping to Conclusions on Credit Card Ban

The ATO’s top official has admitted in Canberra that the tax office got the process around its credit card payment ban wrong. For Australian small businesses, the admission brings a clearer picture of the debate, and more time to plan. Direct credit card payments remain available through 30 June 2027. The ATO’s planned change is scheduled to take effect on 1 July 2027; it has not been cancelled.

Understand why the ATO’s approach changed

The controversy followed the Reserve Bank of Australia’s recommended card surcharge ban, which took effect on 1 October 2026. The ATO said it would not absorb the cost of accepting card payments and planned to stop taking direct credit card payments after 30 November.

The announcement, made to industry just hours before the surcharge ban began, prompted a sharp response from businesses worried about losing a useful cash-flow tool. The ATO was seeking to avoid hundreds of millions of dollars in ongoing card acceptance fees. But many owners said the change could make it harder to manage the timing of tax payments and incoming revenue.

After Treasurer Jim Chalmers intervened, government funding delayed the change until July 2027. The transition now runs to 30 June 2027. At Senate estimates in Canberra on Wednesday 28 October, ATO Commissioner Rob Heferen addressed the decision and the way it was announced. SmartCompany’s report describes his admission that the ATO had made assumptions about why businesses use cards before properly engaging with them.

See what Heferen conceded, and what he did not

Heferen said, “Hindsight’s a wonderful thing,” and acknowledged: “I had jumped to the conclusion” that businesses used credit cards because they were struggling financially and needed help meeting tax bills.

He recognised that this did not explain every business’s choice. Some businesses use the interest-free period on a credit card to smooth cash inflows and outflows, even when they are not in financial difficulty. That timing can matter when a tax payment is due before customers settle their invoices.

The commissioner said the ATO should have had a more open conversation with stakeholders before announcing its decision. He suggested early input from groups such as the Australian Small Business and Family Enterprise Ombudsman could have helped the ATO explore other options. Those might have included referrals or remissions for late payments, which Heferen said are already available in some circumstances when businesses are in trouble.

This was a concession about the process, not a reversal of the policy. The planned end to direct ATO credit card payments remains scheduled for 1 July 2027. Region Canberra’s coverage also reports Heferen’s view that earlier engagement could have helped the ATO share the problem and consider alternatives.

Put the payment figures in context

Heferen cited ATO data showing that 256,000 small businesses pay tax obligations by credit card, about 5% of small business taxpayers. That is a minority, but a substantial number of Australian businesses still need to review their payment processes before the transition ends.

For affected businesses, the issue is not simply whether a card remains technically usable. Compare the value of the interest-free period with any payment or platform fees, and check how long a transaction takes to reach the ATO. The Nightly also reported the ATO’s estimate that accepting card payments without passing on processing costs could cost around $200 million a year. Read its coverage of the estimates hearing.

Use the 2026–27 transition to prepare

Don’t wait until June 2027 to find out whether your current payment routine still works. Use the remaining transition period to take these steps:

1. Map your card use. List which ATO payments you make by card, when they fall due and how much cash-flow flexibility the interest-free period gives you. This helps you measure the impact of changing methods.
2. Set up alternatives. Check whether BPAY or direct debit suits your payment schedule and make sure your bank details and payment processes are ready. Preparing early reduces the risk of a last-minute missed or late payment.
3. Assess third-party platforms carefully. Businesses may still be able to pay tax by card through a third-party payment platform after the ATO stops accepting direct card payments. CFO Tech reports that such platforms may remain an option. Confirm availability, eligibility, fees and processing times directly with a provider before relying on one.
4. Build fees into your cash-flow forecast. If you choose a platform, include its charges in your payment plan so you can compare the full cost with other methods.
5. Watch for ATO announcements. Follow updates on consultation and the final arrangements, including any guidance about alternatives or support for taxpayers who cannot pay through other methods.

Look for a more open ATO conversation

The hearing also brought attention to the government’s knowledge of the proposal. Assistant Treasurer Daniel Mulino said the government became aware in July that the ATO was considering ending direct card payments. Chalmers had previously said he was unaware of the decision until late September, while Small Business Minister Anne Aly said she did not know about it before the ATO announcement. Prime Minister Anthony Albanese has said he played a leading role in securing the delay. Mulino defended Heferen after the estimates hearing, describing the situation as complex.

The debate connects with a wider concern about consultation on tax changes. In our Australia update on industry calls for more meaningful tax reform consultation, business groups warned that short consultation periods can leave organisations with too little time to assess changes. Heferen’s comments show why early, practical input matters: it can help uncover operational effects before a decision is set.

For your business, keep payment records organised and monitor official ATO updates as the 2026–27 transition continues. Sterlinx Global operates as a Global Tax Compliance Suite, supporting Australian businesses with bookkeeping, tax calculations, GST and BAS filings, and year-end accounts. You provide your business data; we manage compliance delivery on an ongoing basis. Book a call with our team to discuss how our compliance services can support your business.

Can Australian businesses still pay the ATO by credit card?

Yes. Direct credit card payments remain available through 30 June 2027. The planned ATO change is scheduled to take effect on 1 July 2027.

What did ATO Commissioner Rob Heferen admit at Senate estimates?

He said he had “jumped to the conclusion” that card users were in financial distress and that the ATO should have spoken with stakeholders earlier.