Blow for councils’ finances as credit card surcharge ban adds pressure to budgets

By the Editorial Team · Sunday, October 11, 2026

Local councils in Australia are facing increased financial pressure due to the federal government’s ban on credit card surcharges that took effect on October 1, which eliminates fees on electronic payments but reduces council revenues. This policy, intended to save consumers $1.6 billion, is forcing councils to seek alternative payment methods and make budget adjustments amid existing funding challenges.

Local councils across Australia are reporting increased financial strain following the federal government’s recent ban on credit card surcharges, which came into effect on October 1. While the policy aims to deliver consumer savings estimated at $1.6 billion by eliminating fees on electronic payments, local government bodies warn it is an unforeseen expense compounding already tight budgets.

The Local Government Association of South Australia (LGASA), representing 68 councils, described the surcharge ban as an added cost pressure. Victoria MacKirdy, LGASA’s chief executive officer, noted that many councils rely heavily on credit card payments for collecting rates and fees. Although no councils in South Australia have so far indicated plans to increase rates in response, the new regulation is forcing budgetary adjustments. “Some councils may encourage greater use of lower-cost payment methods such as BPAY and direct debit while continuing to accept credit cards,” MacKirdy said.

Similarly, councils in New South Wales are anticipating significant financial impacts. One Sydney council expects a loss of around $175,000 for the current financial year, while another NSW council forecasts an annual shortfall of up to $400,000 linked to the surcharge ban.

The Australian Local Government Association (ALGA) has also expressed concern, warning that even modest increases in costs must be understood in the context of existing financial pressures on local government. ALGA officials emphasized that councils manage vast amounts of community infrastructure and deliver wide-ranging services often without commensurate increases in funding or revenue.

The credit card surcharge prohibition has sparked controversy beyond local government. Earlier this month, Treasurer Jim Chalmers intervened to postpone the Australian Taxation Office’s plan to reject credit card payments for tax liabilities until after June 2025, following widespread criticism of the policy’s potential disruption.

Business groups have also weighed in on the ongoing debate. Innes Willox, chief executive of the Australian Industry Group, representing over 60,000 businesses, stated that the issue of who bears the cost of electronic payments remains unresolved. “Whether the payer is a business meeting a tax obligation, a manufacturer paying a supplier, or a consumer making an everyday purchase, someone is absorbing the cost of electronic payments,” he explained.

In contrast, Climate Change and Energy Minister Chris Bowen defended the surcharge ban, underscoring its benefits for consumers and small businesses. Bowen noted that the removal of credit card fees should save everyday Australians more than $1 billion and emphasized recent reductions in interchange fees that lower costs for small businesses. “Australians will be better off because of the eradication of surcharges for credit card use,” Bowen said.

As councils and businesses adjust to the new payment landscape, the government’s policy continues to generate debate about the redistribution of costs associated with electronic transactions and its broader economic implications.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.