Written by: Dylan Murphy (Updated: 04/06/2026)
If your business currently charges customers a fee to pay by card, that ends on 1 October 2026. The Reserve Bank of Australia (RBA) has confirmed the card surcharge ban and the direction to payment providers has already been issued. This isn’t a proposal, it’s happening, and it affects how you price, record and manage your revenue.
Here’s what you need to know.
What’s actually changing
From 1 October 2026, businesses in Australia can no longer pass card surcharges on to customers. The RBA finalised its card payment reforms on 31 March 2026, and has since directed acquirers, that is, the banks and providers behind your card terminals, to remove surcharging functionality entirely.
This applies regardless of whether you currently charge a flat surcharge or a percentage-based one.
What are your options from October?
If you currently recover card transaction costs through surcharges, you’ll need to make a decision before October. There are three practical paths:
- Absorb the cost – accept that card processing fees will now come out of your margin
- Adjust your prices – build the cost of accepting card payments into your general pricing across all sales
- Reduce the cost itself – through least-cost routing, renegotiating with your provider, or encouraging alternative payment methods
The right approach depends on your margins and business model. Our accounting team can help you model the impact before October so you’re not caught short.
What is least-cost routing and should you enable it?
Least-cost routing (LCR) automatically directs debit card transactions through the cheapest available network, usually eftpos rather than Visa or Mastercard. Most business owners don’t realise this option exists, or that it isn’t always switched on by default.
With surcharging disappearing, every saving on the underlying transaction fee goes straight back to your margin. Before October, it’s worth:
- Checking with your terminal provider whether LCR is currently enabled
- Reviewing your merchant statements to confirm the rates being applied
- Asking your provider about updated fee disclosures, these make it much easier to compare and benchmark
GST and your card surcharges – what to know before October
Until 1 October 2026, surcharges are still being collected, so the GST treatment still applies. The rule is straightforward: the surcharge follows the same GST treatment as the underlying sale. If the sale is taxable, the surcharge is taxable. If the sale is GST-free, so is the surcharge.
Your accounting system should be set up to:
- Apply GST to surcharges based on the nature of the underlying supply
- Reconcile surcharge income against actual merchant fees paid within each Business Activity Statement (BAS) reporting period
- Exclude internal administrative costs from surcharge calculations, only the direct, external cost of accepting payment is recoverable
After 1 October, surcharges disappear as a line item. But merchant fees remain a deductible business expense, that doesn’t change.
A common bookkeeping mistake to avoid
Many businesses record only the net amount deposited by their payment provider, after merchant fees have already been deducted. This understates your revenue and creates GST discrepancies in your BAS.
The correct approach is to always record:
- The full sale amount (including any surcharge) as gross income
- Merchant fees as a separate business expense
Supporting records should include tax invoices, merchant statements showing fee deductions, bank statements, and point-of-sale summaries for each reporting period.
Are merchant fees tax deductible?
Yes. Merchant service fees, EFTPOS terminal costs, online payment gateway charges and transaction processing fees are generally deductible business expenses. This doesn’t change under the reforms.
If anything, the deduction becomes more relevant once you’re absorbing costs that were previously passed through to customers.
Alternative payment methods worth considering
Some businesses are also using the lead-up to October as an opportunity to review how they accept payments altogether. Platforms like PayID and Osko enable direct account-to-account transfers through the New Payments Platform (NPP), often without traditional card processing fees.
- For B2B businesses: direct bank transfers remain a practical option for high-value invoices and carry lower processing costs
- For B2C businesses: PayID integration can reduce complexity, particularly where surcharges are no longer permitted
Whatever payment methods you use, make sure your bookkeeping system can accurately reconcile them for BAS and income tax reporting.
What to do before 1 October 2026
To summarise, here’s your pre-October checklist:
- Decide how you’ll recover or absorb transaction costs from October onwards
- Check whether least-cost routing is enabled on your terminals
- Review your current pricing to model the impact on your margins
- Confirm your bookkeeping system is recording gross sales correctly
- Check your BAS configuration for correct GST treatment of surcharges collected before October
The businesses that act early will be in a much better position when the change takes effect.
Talk to our team
If you’d like help reviewing your pricing strategy, GST compliance, or merchant arrangements ahead of October, our accounting team is here to help. We can work through the numbers with you and make sure your systems are set up correctly before the deadline.
Greenhalgh Pickard’s Accounting Team
Disclaimer: This article provides general information only and does not constitute financial advice. It does not take into account your personal circumstances and should not be relied on as a substitute for professional financial advice. This article contains general tax information only. Tax outcomes depend on individual circumstances. You should seek advice from a registered tax agent before making financial decisions. For advice about your specific situation, please contact Greenhalgh Pickard on (07) 5444 1022 to speak with our accounting team.