Tax boss Rob Heferen has admitted he incorrectly jumped to the wrong conclusion about how businesses use credit-card payments, conceding that “hindsight’s a wonderful thing” over his office’s controversial move to axe them.
Australian Taxation Office commissioner Rob Heferen told Senate estimates on Wednesday that earlier consultation could have helped identify alternatives to withdrawing a payment option he estimated was used by about 250,000 small businesses.
The ATO on October 1 gave businesses just two months to find another way to pay their tax. Business groups warned of cash-flow disruption and accused it of double standards: businesses could no longer pass card-processing fees on to customers, yet the tax office was dropping direct card payments rather than paying those fees itself.
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The Government stepped in eight days later, funding a reprieve until June 30, 2027.
Mr Heferen’s evidence exposed a gap in his initial understanding of why businesses used the payment method.
“I had jumped to the conclusion that managing cash flow related to a situation where a person or a business might be struggling,” he said.
He subsequently recognised that businesses not necessarily in financial trouble could use a card’s interest-free period to manage cash flow.
“It’s cashflow and it means breathing space each month,” restaurateur Nahji Chu said, previously reported by The Nightly.
She described a $10,000 tax payment by card as providing a month’s breathing space while more revenue came in.
Mr Heferen said the ATO had proceeded on figures showing only 5 per cent of small businesses used cards to pay tax. Asked how many that represented, he cited 256,000 users, while offering to correct the number if necessary.
He said earlier engagement could have involved businesses in finding a solution, rather than presenting a decision and giving them time to adjust.
“I think we’d be more active in trying to engage with people earlier,” he said.
With the right stakeholders involved, including the small-business ombudsman, “we may well have been in a different situation”.
Business groups had complained about precisely that distinction between shaping the decision and implementing it.
After an October 7 meeting, Australian Chamber of Commerce and Industry chief executive Andrew McKellar said: “The ATO is saying they’re not negotiating the decisions made. They’re talking about implementation and how that’s going to happen.”
The agency’s justification centres on the cost of accepting cards without passing processing fees on to users. The ATO estimates continued acceptance would cost $200 million annually with taxpayers footing the bill.
Mr Heferen said card companies had “engaged very constructively” in negotiations, but their offers remained difficult for the agency to afford.
“The price that they could provide us was still such that we felt it was difficult to to afford,” he said.
Businesses will still be able to pay tax by credit card through third-party providers after June 2027. The ATO has warned taxpayers to consider their fees, charges and processing times.
Its October 9 statement promised further consultation on hardship support and alternatives for taxpayers unable to pay through other methods.
Mr Heferen mentioned payment deferrals and waiving interest on tax debt as measures earlier discussions might have explored, but explicitly stopped short of proposing them.
