Concerns Arise Over Proposed Ban on Card Surcharges for Small Businesses
Small businesses in Australia are expressing significant apprehension regarding the government’s plan to ban card surcharges by the end of 2026. This initiative, heralded by the Labor party, aims to alleviate the rising cost of living by eliminating the $960 million worth of card surcharges that Australian consumers incur annually. However, the impact of this decision may not favour small business owners who already grapple with increased costs.
Wes Lambert, CEO of the Australian Restaurant and Cafe Association, has raised alarms about the potential financial repercussions for the hospitality sector, which has witnessed unprecedented closures due to escalating expenses. Lambert stated, "The hospitality industry is deathly afraid of the debit surcharge ban. For decades, they’ve been able to pass that fee on to consumers but now face the challenge of absorbing the one to two per cent merchant fees without sufficient profit margins."
Dan Dick, an owner of four cafes in Melbourne, calculates that his annual costs for accepting card payments, including merchant fees and software expenses, already reach $25,000. On an average day, with about 600 customers purchasing a $5 coffee, his liability for a potential 5-cent debit card surcharge would translate to approximately $10,950 annually if the surcharge ban proceeds. He expressed frustration, stating, "It’s pretty unfair that they target small business on behalf of consumers instead of the financial institutions that enforce the fees."
Similarly, David Basheer, owner of the Strathmore Hotel, indicated that he transmits around $140,000 in surcharges to patrons each year. "Our profit margins are far tighter than in previous years, and without cost recovery through surcharges, we’ll have to find alternative ways to manage expenses," he noted.
This proposed ban is currently under consultation with the Reserve Bank of Australia (RBA), which seeks to analyse the entire surcharging landscape. The government aims for a rollout by January 1, 2026, but must consider the various stakeholders involved.
Perspectives on how to manage surcharges vary among the major banks. While Commonwealth Bank supports a ban on credit and debit surcharges, Westpac endorses the elimination of debit surcharges. In contrast, NAB opposes the idea, and ANZ advocates for a unified policy across all surcharge types, including buy-now-pay-later options.
Both Visa and Mastercard have shown a preference for banning surcharges entirely. Recent polling data from over 1,500 Yahoo Finance readers revealed that 75% believe banks should be responsible for transaction fees rather than small businesses. Lambert articulated skepticism about the feasibility of banks absorbing these costs and emphasised the inevitable pressure on small business owners, who might be compelled to pass these expenses onto consumers.
He predicted that menu prices would likely surge, stating, "Ultimately, those fees will be passed on to consumers, possibly resulting in an inflationary impact on pricing. Instead of the minimal surcharge of 5 cents for a coffee, it might escalate to an increase of 20, 50 cents, or more depending on other cost pressures."
In conclusion, the average Australian dines out about 61 times per year, resulting in hospitality venues processing approximately 1.26 billion payments annually. Given the growing preference for card payments over cash, small businesses could face substantial financial repercussions should this ban be enforced without a sound compensation structure in place. Lambert and other industry representatives plan to meet with the government soon to discuss the implications of the surcharge ban and advocate for the interests of small businesses.
As discussions continue, the dual objectives of consumer protection and the economic viability of small businesses remain at the forefront of the debate surrounding this contentious policy change.
