The Australian Taxation Office (ATO) has acknowledged missteps in its decision to ban credit card payments for tax bills, a move announced earlier this month that sparked concern among small businesses. ATO Commissioner Rob Heferen admitted during a Senate estimates hearing on Wednesday that the agency had “jumped to conclusions” regarding the potential impact on small business cash flow.

The ban is set to take effect from December 1, following the federal government and Reserve Bank of Australia’s decision to prohibit card surcharges. Heferen explained that the decision to stop accepting credit card payments was made on September 25 after consultations with credit card companies, where the cost of processing payments was deemed too high for the ATO to bear without additional funding. He outlined two options presented to Assistant Treasurer Daniel Mulino: continue accepting credit cards with extra funding or cease acceptance altogether.

Heferen stated that approximately 256,000 small businesses, representing about 5 percent of such entities, currently pay tax bills via credit card. Initially, he believed the change would have a limited effect. However, he acknowledged that learning more about how businesses use credit cards to manage cash flow altered his perspective. “Hindsight’s a wonderful thing,” he remarked, noting that using credit for cash flow management, particularly when facing financial strain, is risky but common.

The commissioner also conceded that earlier consultation with affected stakeholders might have led to a different outcome. The adverse impact of the ban on small businesses is compounded by the existing prohibition on passing credit card fees onto customers, introduced on October 1, which forces businesses to absorb those costs directly.

Matthew Addison, chair of the Council of Small Business Organisations Australia (COSBOA), welcomed the ATO’s recent decision to delay the credit card tax payment ban until 2027 while seeking a more “sustainable” approach. He emphasized the need for the government to consider the financial pressures shared by small businesses that accept credit card payments from their customers.

During the Senate hearing, Liberal Senator Jacinta Nampijinpa Price questioned Heferen about his own remuneration in the context of his comments on small business cash flow challenges. Heferen acknowledged earning a substantial salary, estimated by Price at $928,980 including superannuation.

The controversy highlights the ongoing challenges of balancing operational costs and taxpayer services, particularly for small businesses navigating regulatory changes amid broader economic pressures. The ATO’s delay in implementing the ban reflects growing recognition of these complications and the need for further stakeholder engagement.