What Has the Credit Card Surcharge Ban Done to Franchising and Small Business?
The card surcharge ban took effect on 1 October 2026. Operators lose a revenue line, and many will fold the cost into prices. The ATO will also stop accepting credit cards after 30 November. For franchise networks, that means rewriting pricing, models and agreements. For franchisees, it means tighter cash flow with fewer tools.
What Changed On 1 October
From 1 October, businesses can no longer surcharge eftpos, Mastercard or Visa debit, prepaid and credit card payments. The RBA has also cut the interchange cap on consumer credit cards from 0.8% to 0.3%.
The government says the reform will eliminate more than $1 billion in annual card fees. That is the promise. I have watched enough policy land on small business to know the promise and the shop floor are rarely the same thing.
The Promise Versus The Shop Floor
Businesses are already saying they will raise prices to cover the lost surcharge income. The RBA estimates the effect on measured consumer prices will be small, around 0.1%, and says about 16% of businesses currently surcharge.
I am already seeing it. I have received notification from a number of service providers that their prices will change, but they will remove surcharges. Same cost, new label.
Small in aggregate does not mean small for you. Customers who paid a surcharge now pay nothing extra. Everyone else, including cash customers, pays the higher price. That is a transfer of cost, not a removal of it.
The bank side is not clean either. Lower interchange only helps a merchant if the saving reaches the merchant. The Council of Small Business Organisations Australia (COSBOA) warned that the change would add pressure on small business if the reductions were not passed on in full. Commercial cards are not part of the cut. Their cap stays at 0.8%.
The Franchise Problem
Let's face it. Most franchises are networks of small businesses tied together under a brand and a system. Each owner has to run a tax compliant business that funds the owner, the staff, the expenses and the growth of an asset. I have spent my career inside these networks, and I know how little room most of them have.
For franchisors, the ban is more than a POS terminal setting. Franchise agreements, disclosure documents and operations manuals may need review where surcharge income was part of the picture. Financial models that assumed surcharge revenue need to be re-run.
Pricing is the next trap. If some franchisees surcharged and others did not, prices across the network will move unevenly. Franchisors need to be careful about how they issue pricing guidance under competition law.
Here is a question I suspect most networks have not asked. Royalties are usually a percentage of gross sales. If franchisees lift prices to cover card costs, the royalty base rises. The franchisee carries the cost and the franchisor collects a share of the price rise. Franchising only works when both sides win, so that needs a hard look.
The ATO's One-Two Punch
The ATO announced it will stop accepting credit cards after 30 November 2026. Its reasoning is that a government agency should not pass the cost of merchant fees to the community.
I understand why operators are calling it hypocrisy. Merchants are barred from passing on card costs, and the ATO has simply opted out. That is a fair point to make.
The ATO's defence is also worth knowing. About 2.3% of tax payments were made by credit card in 2024-25, and more than 60% of card payments came from privately owned and wealthy groups and public and multinational businesses.
But for the businesses affected, the percentages do not matter. COSBOA says a relatively small number of small businesses are affected, but those that rely on cards to manage cash flow face a real challenge. Many use the interest-free window to pay a BAS and trade through a tight month. Some fund loyalty points for flights, education and staff benefits.
Anyone with an ATO payment plan linked to a credit card must update it before their next instalment due after 30 November.
What I Would Do Now
Read your merchant statement. Find your effective rate and your plan type. Ask your provider whether the lower interchange caps are being passed through.
Reprice deliberately. Build the cost in on purpose, not by blanket rises. Update menus, signage and online prices together.
Look at cash discounts. An accountant has noted that businesses can still offer discounts for cash and other payment methods. Confirm with your provider first.
Replace the credit card bridge. Talk to the ATO about a payment plan before a bill falls due. The ATO says it will work with small businesses and their advisers on options. Build a cash buffer and look at other facilities.
Franchisors: audit your documents and models. Review agreements, disclosure documents and financial projections. Get legal advice before issuing network pricing guidance.
Franchisors: check the royalty base. Evaluate if your fee structure is about to profiteer from a cost your franchisees’ customers are absorbing.
FAQs
Can a business still pass on card fees?
Not as a separate surcharge. The cost has to be built into prices. Some businesses may offer discounts for cash or other payment methods.
Will the ban lower prices?
The RBA expects only a small effect on measured consumer prices, around 0.1%. Businesses say they will raise prices to cover the lost surcharge income.
Can I still pay the ATO by credit card?
Yes, until 30 November 2026. After that, the ATO will not accept credit cards, and payment plans linked to a card must move to another method.
Speak With a Franchise System Architect
If you are exploring franchising and want to determine whether your business is ready for franchising, it helps to speak with someone who understands the structural side of franchise development.
At Franchising Made Easy®, we specialise in helping founders design franchise systems that are commercially viable, operationally disciplined and built for long-term growth.
If you would like to explore your options, consider booking a consultation to discuss your business and expansion ambitions.
