By Will Nicholas in Canberra

The tax man doubling down on blocking credit card payments has prompted accusations of a double standard and sounded alarm bells within the government.

Australians will no longer be able to pay tax with credit cards from December, after the ATO declared on October 1 it could not absorb the credit card surcharges it was now banned from passing on to taxpayers.

The tax office held its ground in a meeting with business groups on Wednesday, which bred complaints it was shirking a new cost burden the government was forcing on vendors.

Labor frontbencher Claire O’Neill revealed anxieties about the ATO’s firm stance.

“The government does have some real concerns about what the ATO is proposing to do here,” she told Nine’s Today program on Thursday.

“Cash flow is the biggest thing that’s often of concern for small business, and using credit cards to pay tax bill is a way that a lot of people are just managing that issue.

“We really want the ATO to go back and talk to business about what they’ve decided to do here.”

The ban on credit card surcharges, handed down by the Reserve Bank, is expected to save consumers about $1.6 billion a year.

About 2.3 per cent of tax payments were made with credit cards in the 2024-25 financial year, most of them from privately owned, wealthy groups, public and multinational businesses, according to the tax office.

The agency has pledged to write to those with a payment plan linked to a credit card, explaining the changes and their options.

But Digital Economy Minister Andrew Charlton said the government was behind the ATO.

“They don’t want the people who are not paying by credit card, which is 98 per cent of taxpayers, to be subsidising those that do,” he told ABC Radio.

“The tax office offers payment plans for small businesses … the cost of those plans, the interest rate on those plans, is much lower than the interest rate on credit cards.”

Lowering caps on interchange fees between banks and card issuers, which also came into effect on October 1, could help offset some of the new policy’s growing pains, Mr Charlton said.

But the government was plugging a double standard by forcing businesses to shoulder credit card surcharges while the ATO let itself off the hook, according to Nationals Senate leader Bridget McKenzie.

“The prime minister promised that removing the surcharge would make coffees go down somehow – evanesco, surchargio, disappearo,” she said.

“The government needs to direct the ATO to accept credit cards because the reality is, if you’re paying cash or card right now, you are paying a surcharge for Labor’s economic failure.”

Business groups have urged the tax office to rethink its decision, with opposition frontbenchers pleading with the government to strong-arm the agency.

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