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

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:

Remove surcharge settings from your point-of-sale system.
This prevents non-compliant fees from being added to in-store transactions.
Review Shopify, WooCommerce and other checkout settings.
Online sellers must remove card surcharges from checkout pages, payment rules and automated customer emails.
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.
Review contracts with payment providers.
Check how merchant service fees, gateway charges, refund fees and chargeback costs will be treated after 1 October.
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.
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.