TITLE: Australia Tax and Compliance Update: Payroll, GST, Card Surcharges, and Contractor Records
Australia’s latest tax and compliance developments affect payroll, GST reporting, card payment processes and contractor records.
For Australian businesses and international companies operating in Australia, today’s key actions are:
- Apply the new 15% personal income tax rate in payroll processes from 1 July 2026.
- Prepare for the planned end of card surcharging from 1 October 2026.
- Review eligibility for the proposed simplified GST accounting method for restaurants, cafés and caterers.
- Keep GST refund claims supported by genuine business records.
- Wait for TPAR data to become available after 28 August 2026 before finalising affected tax returns.
Apply the new 15% rate to 2026–27 payroll
The Australian Taxation Office has confirmed that the personal income tax rate applying to taxable income between $18,201 and $45,000 has reduced from 16% to 15% from 1 July 2026.
The change applies to the 2026–27 income year. It is part of legislated personal income tax cuts that apply across the Australian resident tax scale.
The current resident tax rates for 2026–27 are:
| Taxable income | Marginal tax rate |
|---|---|
| $0 to $18,200 | 0% |
| $18,201 to $45,000 | 15% |
| $45,001 to $135,000 | 30% |
| $135,001 to $190,000 | 37% |
| Over $190,000 | 45% |
The ATO states that the 15% rate applies from 1 July 2026, with a further reduction to 14% scheduled from 1 July 2027.
Check your payroll settings now
Employers should confirm that their payroll software, withholding calculations and employee pay runs reflect the updated tax tables.
Complete these checks:
- Confirm your payroll system uses the tax tables effective from 1 July 2026.
- Review employee withholding calculations.
- Check director and employee salary payments.
- Reconcile payroll reports to the general ledger.
- Keep evidence of payroll software updates and configuration changes.
Updating payroll promptly helps you withhold the correct amount of tax and reduces the risk of employee complaints, year-end corrections or inaccurate reporting.
You can review the ATO’s official guidance on personal income tax cuts for every Australian taxpayer.
Prepare for the card payment surcharge changes
A clarification is important here. The card payment review is being led by the Reserve Bank of Australia (RBA), rather than the ATO.
The RBA has concluded that surcharging on eftpos, Mastercard and Visa debit, prepaid and credit cards should end from 1 October 2026. The reform follows a review of merchant card payment costs and surcharging practices.
The RBA says the current system has become difficult for consumers and businesses to understand. It also found that surcharges are not always clearly disclosed.
Review your pricing before 1 October
If your business currently adds a card payment surcharge, you should prepare for the change now.
Your checklist should include:
- Identify all card surcharge rules in your point-of-sale system.
- Check whether your payment provider will automatically disable surcharging.
- Review website, checkout and invoice wording.
- Recalculate gross pricing if you need to absorb payment costs.
- Confirm how card fees and transaction charges are recorded in your accounts.
- Train staff to explain the change consistently to customers.
The RBA also plans to reduce certain interchange fee caps and improve transparency over merchant payment costs. Most of these changes are expected to take effect on 1 October 2026, while some foreign card and transparency measures are scheduled for 1 April 2027.
Read the RBA’s official conclusions on merchant card payment costs and surcharging. You should also monitor the ACCC guidance on card surcharges.
Although the RBA and card networks lead this reform, you still need accurate accounting treatment for sales, merchant fees and GST. This ensures your BAS and financial reports remain complete.
Monitor the proposed simplified GST method for food businesses
The ATO is consulting on draft legislative instrument LI 2026/D19, which covers a simplified accounting method for eligible restaurants, cafés and caterers.
The draft method is intended to continue a simplified approach for eligible businesses that sell a mixture of taxable and GST-free food. It can reduce the need to classify every individual trading stock purchase when calculating the net GST amount.
The existing 2016 determination is scheduled to sunset on 1 October 2026. The proposed instrument is designed to support continuity of the simplified framework.
Check whether your business may qualify
Under the draft instrument, an eligible business would generally need to:
- Be registered for GST throughout the relevant tax period.
- Operate a restaurant, café or catering business.
- Remain within the applicable small enterprise turnover threshold.
- Apply the method consistently for the relevant GST tax period.
The current small enterprise turnover threshold is generally $2 million, although you should verify your position against the final instrument and your specific facts.
The consultation period is open until 28 August 2026. Businesses currently using the simplified accounting method should monitor the ATO’s consultation and finalisation process. Doing so will help you avoid an interruption or incorrect method after the existing determination sunsets.
Review the ATO draft legislative instrument LI 2026/D19 and the ATO open consultation register.
Keep GST refund claims fully supported
The ATO continues to pursue fraudulent GST refund claims through Operation Protego.
The operation has resulted in convictions and prison sentences for individuals who allegedly created false businesses, lodged fictitious BAS and claimed GST refunds that were not supported by genuine transactions.
The compliance message is straightforward: claim only GST that relates to real business activity and retain evidence for every material transaction.
Strengthen your BAS evidence
Before claiming GST refunds, confirm that you have:
- Valid tax invoices and supplier records.
- Evidence that goods or services were actually supplied.
- Bank or payment records supporting the transaction.
- Clear business-purpose documentation.
- Correct GST coding in your accounting system.
- Reconciled sales, purchases and GST control accounts.
Documentation should be retained in line with the ATO’s record-keeping obligations, generally five years. Implementing regular review of claims, segregation of duties and approval workflows reduces the risk of errors or deliberate manipulation.
Contractor reporting: wait for TPAR data before finalising returns
Businesses that pay contractors should ensure their reporting is complete before finalising 2025–26 tax returns. If you are required to lodge the Taxable payments annual report (TPAR), the due date is 28 August 2026 for the 2025–26 income year.
However, the ATO has announced that TPAR data will not be available for pre-filling in tax returns until after the lodgment deadline. Therefore, you should wait for the data to appear in ATO systems before finalising affected income tax returns.
Confirm contractor payment reporting now
Reporting obligations apply to businesses in industries such as building and construction, cleaning, courier services, information technology, road freight, security and mixed industries. The ATO continues to match TPAR data against contractor tax returns to identify discrepancies.
To stay compliant, verify that you have:
- Accurate contractor details, including the correct ABN and name.
- Total payments reported match your accounting records.
- All required industries are covered in the TPAR.
- Contractor payments are reconciled to bank statements.
- Any deemed employer obligations, such as superannuation and PAYG withholding, are assessed.
The ATO’s focus on the sharing economy and contractor arrangements also highlights the importance of checking whether workers are employees or contractors for tax and super purposes. Getting the classification right prevents underpayment of super, payroll tax and workers’ compensation obligations.
If you are unsure whether your business needs to lodge a TPAR, review the ATO’s guidance or seek professional advice. Missing the deadline or lodging incorrect data can attract penalties and increase scrutiny of your tax affairs.
If your business needs assistance with these developments, including payroll configuration, GST compliance or contractor reporting, contact us.
