Australian Taxation Office (ATO) Commissioner Rob Heferen has admitted the agency initially misunderstood why small businesses use credit cards to pay their tax, prompting renewed criticism of the Albanese Government’s approach to small business.
Heferen told Senate estimates that earlier consultation could have helped the ATO better understand businesses’ reliance on credit cards to manage cash flow.
“I had jumped to the conclusion that managing cash flow related to a situation where a person or a business might be struggling.”
He acknowledged that financially healthy businesses also use credit cards’ interest-free periods to bridge gaps between expenses and incoming revenue.
One Nation leader Senator Pauline Hanson criticised the ATO’s handling of the decision, arguing that the agency had failed to understand the practical realities facing small businesses.
“Career politicians who think they know better than the Australians taking risks and running businesses. They don’t understand the impact, won’t listen and don’t care who pays the price.”
Senator Jacinta Nampijinpa Price has taken this opportunity to criticise Labor’s proposed 30 per cent tax on discretionary trusts, warning that the changes could increase costs for hundreds of thousands of small businesses.
Senator Price also attacked the Albanese Government’s proposed 30 per cent tax on discretionary trusts, following Treasury advice that around 350,000 small businesses could be affected.
Price said businesses faced three difficult options: pay the new tax, restructure their affairs and potentially incur stamp duty costs, or accept restrictions on future distributions to beneficiaries.
She also cited media reporting that some businesses could face effective tax rates of 60 to 70 per cent unless they restructured their arrangements.
“Labor should be backing our small businesses, not breaking them,” Price said, accusing the Government of failing to address concerns raised by business owners.
“Jim Chalmers and his colleagues have been given every chance to listen to small businesses and scrap this terrible policy, but have so far refused to do so.”
She warned that additional tax liabilities and restructuring costs could place further pressure on businesses already facing financial challenges.
The ATO announced that it would stop accepting direct credit card payments for tax from 1 December 2026, affecting an estimated 256,000 small businesses. Following concerns from business groups, the Federal Government intervened on 9 October to extend the arrangement until 30 June 2027.
Heferen said the agency had relied on figures showing that around five per cent of small businesses used credit cards to pay tax. He acknowledged that earlier engagement with affected businesses and industry representatives might have produced a different outcome.
The ATO has cited the cost of processing card payments as a key reason for the planned withdrawal, estimating that continued acceptance would cost about $200 million annually if the fees were absorbed by taxpayers.
Businesses will still be able to pay tax by credit card through third-party providers, although fees and processing times may vary.
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