Daily Australia Tax Update: 29 September 2026. Card Surcharge Ban Starts Thursday, ATO Software Royalty Ruling Bites & 31 October Lodgment Warning

by Ariful | Sep 29, 2026 | Australia Updates

Your compliance priorities for the week ahead

Australian businesses have three immediate compliance priorities this week: remove card surcharges before Thursday, review offshore software payments under the ATO’s final royalty ruling, and prepare for key 31 October lodgment obligations.

The ATO is also increasing its use of data, tip-offs and targeted visits. Accurate bookkeeping and complete records are now essential for Australian e-commerce sellers, digital businesses and growing SMEs.

Remove card surcharges before 1 October

From Thursday, 1 October 2026, Australian businesses can no longer apply card payment surcharges to payments made using:

• eftpos
• Mastercard
• Visa

The change applies to credit, debit and prepaid cards. It covers both Australian-issued and internationally issued cards, as well as online and in-person transactions.

American Express and UnionPay are also voluntarily removing surcharges. PayPal is voluntarily removing its surcharge arrangements as well.

The Reserve Bank of Australia’s implementation guidance confirms that the surcharge changes take effect on 1 October. The RBA is also reducing the interchange cap for domestic-issued consumer credit cards from 0.8% to 0.3% of the transaction value.

The domestic debit and prepaid card cap will also reduce to 8 cents per transaction and 0.16% of transaction value. These changes should reduce some wholesale payment costs for merchants, although your actual merchant service fees will depend on your payment provider and pricing plan.

Complete this payment compliance checklist

Do not wait for Thursday. Complete these checks now:

1. Remove surcharge settings from your point-of-sale system.
   This prevents non-compliant fees from being added to in-store transactions.

2. Review Shopify, WooCommerce and other checkout settings.
   Online sellers must remove card surcharges from checkout pages, payment rules and automated customer emails.

3. Check Amazon, marketplace and payment gateway arrangements.
   Confirm whether surcharges are controlled by your payment gateway, marketplace integration or merchant account. This reduces the risk of a fee continuing after the legal change.

4. Review contracts with payment providers.
   Check how merchant service fees, gateway charges, refund fees and chargeback costs will be treated after 1 October.

5. Update customer-facing prices.
   If you previously recovered payment costs through a separate surcharge, decide whether those costs need to be reflected in your standard pricing. Do not describe a card-specific fee as a general service fee.

6. Update your bookkeeping.
   Stop recording card surcharge income from 1 October. Continue recording merchant fees and payment processing charges as business expenses, subject to the normal deductibility rules.

Keeping your accounting system aligned with your checkout system will help you reconcile sales, GST and payment settlements accurately.

Review offshore software and SaaS payments

The ATO has finalised Taxation Ruling TR 2026/2, which explains when payments under software and intellectual property arrangements may be treated as royalties.

The ruling is particularly important for Australian digital businesses that pay overseas suppliers for:

• SaaS platforms
• cloud software
• software licences
• white-label technology
• software distribution rights
• access to offshore intellectual property
• related-party technology services

If a payment is a royalty, Australian withholding tax may apply. The relevant treatment depends on the legal rights granted, how the software is used, the payment flow and any applicable tax treaty.

The ATO’s draft Practical Compliance Guideline PCG 2026/D4 sets out proposed risk zones for cross-border software payments. It is not law, but it indicates the types of arrangements likely to attract ATO attention.

Check your software payment structure

Review each offshore software arrangement and document:

• Who owns the software and intellectual property?
• Does your business receive a right to use, reproduce, distribute or commercialise the software?
• Are you paying for a service, infrastructure or access to intellectual property?
• Are you reselling or facilitating access to the software for Australian customers?
• Is the supplier a related company?
• Is part of the payment passed to an offshore software owner?
• Does a tax treaty affect the withholding outcome?
• Were withholding tax obligations considered when payments were made?

A simple subscription used internally by your Australian business may require a different analysis from a reseller or white-label arrangement. The contract wording alone may not determine the outcome. The commercial substance and rights provided are important.

Do not assume that calling a payment a “SaaS fee” removes withholding obligations. If your business has paid offshore software suppliers throughout 2025–26, organise the contracts, invoices, payment records and supplier details now. This will make the compliance position easier to establish and support your records if the ATO asks questions.

Prepare for the 31 October lodgment deadline

The 31 October deadline is approaching for several Australian tax obligations.

For individuals and many small businesses lodging directly, 2025–26 income tax returns are generally due on 31 October 2026. Because 31 October falls on a Saturday, the practical due date may move to the next business day under the ATO’s weekend rule. Confirm the applicable date for your return and lodging method.

If you use a registered tax agent, you may qualify for a later date under the tax agent lodgment program. However, you generally need to engage the agent and be included on the relevant client list within the required timeframe. Outstanding prior-year returns can also bring a return back to a 31 October deadline.

The ATO’s October 2026 registered agent lodgment guidance should be checked for your specific obligation.

Reports that may also be due

Review whether your business needs to lodge PAYG withholding annual reports for:

• payments where an ABN was not quoted
• interest, dividend and royalty payments to non-residents
• specified payments to foreign residents

The ATO explains these annual reporting obligations in its PAYG withholding annual reporting guidance.

Before lodging, reconcile:

• payroll records
• PAYG withholding amounts
• contractor payments
• non-resident payments
• royalty payments
• bank transac

Daily Australia Tax Update: 28 September 2026. Treasury Consultation Closes Today, ATO’s Expanded Software Royalty Ruling & WA Public Holiday Shifts Payday Super Deadlines

by Ariful | Sep 28, 2026 | Australia Updates

TITLE: Australian Tax and Compliance Deadlines: Treasury Consultation, Software Royalties, Payday Super and More

Submit Treasury consultation responses before today’s deadline

Treasury’s consultation on exposure draft legislation for the 2026–27 Budget tax reform measures closes on Monday, 28 September 2026.

The proposals sit within the proposed Treasury Laws Amendment (Tax Reform No. 5) Bill 2026 and cover several important measures for Australian start-ups, investors and businesses conducting research and development.

Innovative Business CGT Concession

The proposed Innovative Business CGT Concession (IBCC) would provide a 50% CGT discount for early investors in eligible innovative Australian start-ups.

However, the draft tests may be difficult for businesses that evolve over time. Industry bodies and advisers have raised concerns about:

• Complex innovative business and predominant activity tests.
• The treatment and valuation of business assets.
• Employee-based tests that may not suit founder-led start-ups.
• Revenue tests that may be difficult for pre-revenue businesses.
• The risk that a start-up could lose eligibility after pivoting or changing strategy.
• Potential issues for founders and early investors where control and affiliate rules apply.

Accounting Times reported concerns about the complexity of the proposed tests, while SmartCompany reported Ai Group’s concerns about start-ups losing the concession after changing direction.

The IBCC remains exposure draft legislation. It is not enacted law. Do not treat the proposed concession as an available tax outcome until legislation is passed and the final rules commence.

R&D Tax Incentive simplification

The consultation package also proposes changes to the R&D Tax Incentive, including:

• Removing eligibility for certain supporting R&D activities.
• Increasing the minimum eligible R&D expenditure threshold.
• Increasing the maximum expenditure threshold.
• Changing offset rates.
• Changing the turnover threshold for the refundable offset.
• Restricting the refundable offset for entities within their first 10 years.
• Extending the relevant period to 15 years for entities conducting R&D connected with therapeutic goods.

These changes could affect Australian technology companies, SaaS businesses, medical technology businesses and other growing companies that rely on R&D tax offsets to support development costs.

Expanded venture capital tax incentives

The proposals would also expand venture capital tax incentives through Venture Capital Limited Partnership (VCLP) and Early Stage Venture Capital Limited Partnership (ESVCLP) structures. The aim is to ensure the eligible investment framework reflects the modern Australian start-up environment.

Action today: If your company, fund or investment structure may be affected, submit comments through the Treasury consultation platform before the end of today.

Keep:

• A copy of your submission.
• The version of the exposure draft you reviewed.
• Supporting calculations and assumptions.
• Evidence of the date and time of submission.

KPMG’s summary of the consultation package provides a useful overview of the proposed IBCC, R&D and venture capital changes.

Review offshore software payments under TR 2026/2

The ATO issued Taxation Ruling TR 2026/2 on 4 September 2026. It replaces outdated 1993 guidance and explains when cross-border payments for software and intellectual property may be treated as royalties.

The practical issue is whether the payment is for the use of, or the right to use, copyright or similar intellectual property rights.

Payments may fall within royalty treatment where an arrangement gives a business rights to:

• Reproduce software.
• Communicate or distribute software in a way involving copyright rights.
• Modify or adapt software.
• Host, integrate or otherwise exploit software beyond ordinary access.
• Authorise others to exercise relevant copyright rights.

New analysis published by Dentons on 28 September 2026 highlights that arrangements involving licence keys and login-gated access may fall within the wider analysis. The label used in a contract, such as “subscription”, “distribution fee” or “royalty-free”, will not decide the tax treatment.

The ruling applies to both new and existing arrangements.

Complete a software payment review

If your Australian company pays an offshore software, SaaS or digital platform provider, review:

1. The contract and all schedules.
2. Who hosts the software.
3. Whether your business can copy, modify, adapt or communicate the software.
4. Whether licence keys provide access only or support wider IP rights.
5. Whether the payment combines software rights with support, implementation or distribution services.
6. Whether Australian withholding tax applies.
7. Whether an applicable tax treaty changes the outcome.
8. Whether your accounts payable and bookkeeping coding captures any withholding obligation.

The ATO’s software royalty guidance should be reviewed alongside the final ruling.

Australian software and digital businesses invoicing overseas customers should also document what they are supplying. Clear contracts and transaction records will help distinguish software access, services, support and the use of intellectual property.

Skip today’s WA public holiday when counting Payday Super

Today is the King’s Birthday public holiday in Western Australia. Because it is a whole-of-state public holiday, it does not count as an Australian business day for Payday Super purposes.

This applies nationally. Your business does not need to be located in Perth or Western Australia for the holiday to affect the calculation.

Under the ATO’s Payday Super guidance, employers must pay superannuation at the same time as wages, with a limited number of business days allowed for the payment to reach the fund.

Missing a Payday Super deadline can trigger the Superannuation Guarantee Charge, which includes:

• The unpaid superannuation amount.
• Interest.
• An administration fee for each employee.
• Loss of the deduction for the superannuation contribution.

Businesses should recalculate any Payday Super deadline that falls near 28 September 2026, particularly where the deadline falls on or after today. Confirm the correct deadline with your payroll provider and document the calculation you used.

Prepare for the 1 October card surcharge ban

From 1 October 2026, businesses will no longer be permitted to pass on card surcharges to customers for card payments. The change follows the RBA’s review of merchant card payment costs and surcharging.

The ban applies to:

• Debit card payments.
• Credit card payments.
• Prepaid card payments.
• Card payments processed through a mobile wallet or digital wallet.

The ban does not apply to surcharges for other payment methods, such as BPAY, PayPal or cash, unless those surcharges breach existing rules.

Businesses should now:

1. Identify which payment methods currently attract a surcharge.
2. Determine the cost impact of absorbing card surcharges.
3. Update merchant terminals, online checkout and point-of-sale systems.
4. Update pricing, signage, invoices, quotes and contract terms.
5. Train staff on the change.
6. Seek legal or accounting advice on pricing decisions.

Businesses that absorb the surcharge may choose to increase prices or change their cost structure. Any increase should be reviewed against existing pricing and contract arrangements.

Prepare for foreign resident CGT changes from 1 October

From 1 October 2026, changes to the foreign resident capital gains tax rules take effect for CGT events occurring on or after that date.

Key changes include:

• Removing the main residence exemption for foreign residents, subject to transitional rules.
• Introducing a broader principal asset test for indirect interests in Australian real property.
• Extending the non-final withholding and CGT rules to more asset classes.

Foreign residents selling Australian property or holding interests in Australian entities with significant Australian real property should obtain advice before proceeding with a transaction.

The changes may affect:

• The calculation of capital gains and losses.
• Available exemptions.
• Withholding obligations on purchasers.
• The way transactions are structured.

Businesses and individuals with foreign resident owners or investors should confirm whether the changes apply before 1 October 2026.

Key dates to note

Businesses and their advisers should confirm each deadline against their own circumstances and the current ATO guidance.