Some small businesses are paying tax bills with credit cards. What will happen when they can’t?

Australia’s tax authorities have banned businesses from paying tax bills with credit cards, sparking concerns over potential financial strain on small businesses. The Australian Taxation Office (ATO) stopped accepting credit cards as a payment method from October 1, citing costs of processing credit card payments at nearly A$200 million annually. Business groups have criticized the move, arguing it could exacerbate financial pressures on small businesses.

The ATO ban stems from estimated costs of processing credit card payments, which the office has decided to eliminate. Some businesses may experience difficulties paying their tax bills due to genuine cash shortages or convenience. Credit cards can provide short-term financing options for businesses awaiting customer payments or offer reward points and interest-free periods.

However, the total number of businesses relying on credit cards to pay tax bills is relatively small, accounting for 5% of small businesses and 2% of individual taxpayers.

The ATO's move could result in increased unpaid tax debt and collection expenses if businesses with insufficient cash cannot pay their tax bills. Alternative payment methods, such as bank overdrafts, business loans, and payment platforms that accept credit cards, are available for businesses facing financial difficulties. The ban may blur the line between businesses that genuinely need financial assistance and those who can manage their tax obligations more efficiently.

Small businesses should review their upcoming tax obligations, assess financing options, and contact the ATO early if payment difficulties are anticipated. The issue is not whether taxpayers should fulfill their obligations but whether removing a payment option makes collection fairer and more efficient or worsens the situation for those already struggling.