Starting December 1, Australian taxpayers will no longer have the option to settle their tax obligations with the Australian Taxation Office (ATO) using credit cards. This decision stems from new regulations banning businesses from imposing surcharges to offset card payment fees. Instead of absorbing the nearly $200 million annual cost of processing credit cards, the ATO has opted to discontinue this payment method entirely, effective next month.
Business organizations have opposed the ruling, arguing it could heighten financial pressures on smaller enterprises. The federal government faces calls to act, and Labor has reportedly requested the ATO to engage in further discussions with small businesses to ensure flexibility is included.
Credit Card Payments for Tax Bills
The ATO reports that credit card transactions accounted for 2.3 per cent of all tax payments in 2024–25. Over 60 per cent of the value from these credit card payments originated from affluent private entities, public corporations, and multinational firms. Yet this doesn’t inherently indicate that small businesses lack dependence on credit cards for tax payments.
The ATO states that roughly 5 per cent of small businesses utilized credit cards for tax payments in 2024–25, with just over 2 per cent of individual taxpayers doing the same. Businesses might employ credit cards for various reasons, such as covering a brief cash gap or leveraging reward points or interest-free intervals.
For example, a landscaping firm that hasn’t received customer payments yet but needs to meet quarterly tax deadlines might use a credit card to create a temporary reprieve until invoices are settled. This isn’t an indication of poor performance or mismanagement, but rather a temporary liquidity issue.
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Financial Pressures on Small Businesses
There is evidence that some small businesses are facing increasing financial pressure. A June report from the Australian National Audit Office found that small businesses owed $35.9 billion in collectable tax debt in 2024–25, an increase of $19.4 billion since 2018–19. Financial Counselling Australia also reported a 21 per cent increase in cases handled by its small business debt helpline during 2025, with almost two-thirds involving ATO debt.
The Reserve Bank of Australia’s Financial Stability Review has highlighted increasing cashflow challenges for smaller enterprises, especially in construction, hospitality, and retail sectors. Raised interest rates, operational expenses, and delayed customer payments can exert significant pressure on businesses with limited financial buffers. The Housing Industry Association has urged the federal government and ATO to reverse the credit card prohibition, arguing it would intensify current pressures on residential builders.
The ATO ban on credit card payments could have further unintended consequences, such as increasing unpaid tax debt and collection expenses. If a business cannot pay its tax obligations, the debt will sit with the ATO, rather than being transferred to its bank. The ATO’s decision is financially defensible, but its consequences for vulnerable small businesses should not be overlooked.
Businesses currently using credit cards should evaluate their future tax liabilities, explore financing alternatives, and reach out to the ATO promptly if payment issues are expected. The ATO provides installment payment plans, though standard interest charges persist. Additional options encompass bank overdrafts, business loans, and select third-party platforms that process credit card payments on behalf of businesses and remit funds to the ATO, typically for a fee. The restriction applies solely to credit cards, while businesses can still utilize debit cards, BPAY, bank transfers, and direct debit for tax payments – provided they have sufficient funds in their accounts.
Alternatives for Businesses
Businesses facing challenges may qualify for ATO payment plans, enabling debt repayment through scheduled installments. Nevertheless, standard interest charges persist, and ATO interest accrued from July 1, 2025, is no longer tax deductible.
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