The Australian government has acknowledged that senior officials were aware of the Australian Taxation Office’s (ATO) intention to ban credit card payments for tax bills months earlier than previously disclosed. Assistant Treasurer Daniel Mulino confirmed on Sunday that he and Treasurer Jim Chalmers knew as early as July about the ATO’s preference to stop accepting credit card payments in response to a Reserve Bank decision to ban merchant fees on credit card transactions starting October 1.

The ATO’s initial plan was to implement the ban from December 1, which was met with swift backlash from small businesses, particularly within the construction sector. Following the outcry, the government intervened to delay the ban until July 1, 2027. Prime Minister Anthony Albanese claimed he extended the deadline after receiving a direct message from Andrew McKellar, chief executive of the Australian Chamber of Commerce and Industry (ACCI). However, McKellar expressed concern that the government had known about the ATO’s preference months earlier but only disclosed it shortly before the original deadline, describing the policymaking process as deficient.

Mulino explained that the government’s position in July was to require the ATO to maintain negotiations with credit card companies to reduce transaction fees and to establish a transition period. He emphasized that absorbing credit card payments indefinitely would have serious fiscal consequences. Although discussions with card companies have led to improved offers, the ATO did not reach a long-term arrangement to continue accepting credit cards without imposing costs on the budget.

The situation has intensified worries in the small business community, particularly within the building and construction industries. The Master Builders Australia (MBA) highlighted that the sector accounted for 22.5% of business insolvencies in the year to August, pointing to the significant financial pressure faced by small tradies and builders. MBA acting chief executive Melissa Byrne warned that removing credit card payments as a tax option could heighten the risk of tax debt accumulation among businesses already grappling with cash flow challenges. She called for the ATO to differentiate between businesses unable to pay due to hardship and those intentionally avoiding obligations.

Further complicating matters, the government faces criticism over proposed tax reforms related to discretionary trusts, including a minimum 30% tax rate. Mulino acknowledged that some businesses using trusts could face effective tax rates surpassing the top marginal rate, although he noted the inclusion of transition periods and exemptions for certain trust types.

The public dispute over the timing and communication of the credit card payment ban has drawn attention to internal tensions within the government. Albanese and Chalmers have denied any rift following the Prime Minister’s intervention, with both expressing confidence in the Treasurer’s handling of the issue. Nonetheless, members of Labor and opposition parties continue to scrutinize the process, calling for more transparent and consultative policymaking to avoid further strain on small businesses.