The Card Surcharge Ban, and What It Changes in Your Pricing, Fees and Books

Last reviewed: October 2026

What changed with card surcharges on 1 October 2026?

Businesses can no longer add a surcharge when a customer pays by eftpos, Mastercard or Visa, whether by credit, debit or prepaid card. The change came from the Reserve Bank's Review of Merchant Card Payment Costs and Surcharging Conclusions Paper, released on 31 March 2026. The RBA did not pass a law. It lifted its own prohibition on "no-surcharge" rules, which freed the three designated card networks to write a surcharge ban into their merchant rules.

The other big networks followed. The RBA's surcharging FAQ states that American Express, UnionPay and PayPal have also decided to remove surcharging. American Express withdrew from its existing undertaking with the RBA on 1 October 2026, and PayPal's no-surcharge rule took effect from 5 October 2026.

The practical consequence is that enforcement runs through your merchant agreement. If a terminal is still adding a percentage at the point of sale, the payment provider is the party that will act on it, and the first one to call. The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) card surcharging ban page confirms the ban is now in effect and lists the systems to review: eftpos terminals, point-of-sale systems, invoicing software and online payment platforms.

Why did the RBA ban surcharging?

Because the RBA concluded the old framework was no longer fit for purpose. Surcharging was meant to signal that some cards cost more to accept, so customers could choose a cheaper method. The RBA found that signal had broken down. Cash, the usual surcharge-free option, fell to around 15% of in-person transactions in 2025 from 69% in 2007, so avoiding a surcharge got harder. Many small merchants moved to single-rate plans that charge the same percentage for every card, which weakened the link between a surcharge and a card's real cost.

The money involved is not small. The RBA estimates consumers pay $1.6 billion of the $1.8 billion in annual card surcharges on the designated networks. In its published merchant surcharging data for 2023/24, around one-third of hospitality merchants (restaurants, cafes, bars and fast food) applied a surcharge, compared with 6% in professional services., which is why hospitality clients are where most of the bookkeeping clean-up will sit.

What can a business still charge after the surcharge ban?

A business can still charge any fee that applies regardless of how the customer pays. The RBA FAQ is specific: the rules do not apply to weekend surcharges, public holiday surcharges, or booking or service fees. A card payment surcharge, in the RBA's words, does not include a surcharge which applies regardless of payment method.

The test is whether the fee depends on the payment method. A 10% Sunday surcharge charged to everyone is fine if it is disclosed before purchase. A 1.5% "processing fee" that only appears when someone taps a card is a card surcharge with a new label, and the ban applies.

Discounts also remain open. The RBA states that businesses wanting to steer customers to another payment method can do so with discounts instead of surcharges, and ASBFEO's post-1 October FAQ confirms discounts for cash or PayID are allowed, as long as the discount is clearly displayed and customers can see who qualifies and how much they save.

Should small businesses raise prices to cover card fees?

Some should, and the RBA expected it: the Conclusions Paper anticipates that the 16% of merchants that currently surcharge may increase their advertised prices to cover card acceptance costs. Whether a particular business should depends on one number most owners have never calculated, which is their effective merchant fee rate.

That rate is total merchant fees for a period divided by total card takings for the same period. It is not the rate on the brochure, because it blends debit and credit, card-present and online, domestic and foreign cards, plus terminal rental and any monthly minimums. Take the last three months of merchant statements, add up every fee line, and divide by card sales. That is the figure to price against.

Here is a worked example, not client data. A cafe takes $40,000 a month on cards and pays $480 in merchant fees, an effective rate of 1.2%. Before October it passed that on through a surcharge. Now it either absorbs $480 a month, which is $5,760 a year straight off profit, or it lifts prices by about 1.2% across the menu. A $5.00 coffee becomes $5.06, which nobody will charge, so in practice the owner rounds to $5.10 on some items and leaves others alone. The arithmetic is simple. Getting the input right is not, and that is bookkeeping work.

Two constraints apply to any price change. ASBFEO is explicit that if a business changes the price of a product or service, it must not mislead customers about the reason for the increase. And the displayed price has to be the price paid: ASBFEO's example is a drink displayed at $4.95 costing $4.95 whether paid by cash, debit card or credit card. The ACCC's price display guidance, which ASBFEO points to, is the reference for how prices must be shown.

Are merchant fees going down as well?

They should, because the RBA cut the wholesale fees inside them on the same date. Interchange is the fee the merchant's provider pays the cardholder's bank, and it is built into most merchant fees. From 1 October 2026, according to the RBA's impact and implementation chapter, the cap on domestic consumer credit card interchange fell to 0.3% of transaction value, and the debit and prepaid cap fell to 8 cents per transaction or 0.16% of transaction value. A 1.0% cap on foreign-issued cards follows on 1 April 2027.

The RBA estimates the lower caps will reduce wholesale card payment costs for merchants by around $910 million a year, with small merchants expected to benefit most. Whether that reaches a given business depends on its provider passing it on. The RBA is making that easier to check: large acquirers must publish the fees they charge merchants each quarter from 30 October 2026, and must publish how much of the interchange cut flowed through to merchant service fees from 30 January 2027.

For a bookkeeper, this makes the October merchant statement a useful comparison point. If a client's effective rate in October is no lower than September's on a similar card mix, that is worth raising with the client and, through them, the provider. ASBFEO suggests now is a good time for businesses to compare payment providers.

How should bookkeepers record merchant fees and sales after the ban?

Merchant fees stay an expense, recorded gross with the GST shown on the provider's tax invoice or statement. What changes is the income side. Australian bookkeepers commonly handled surcharges in one of two ways: a separate "card surcharge income" account, or surcharges netted against the merchant fee account so the expense showed close to zero. Both stop working on 1 October.

If you used a separate income account, archive it for new transactions from 1 October 2026 and keep it for history. If you netted surcharges against fees, expect the fee account to jump in October, and warn the client before they see the profit and loss. Nothing has gone wrong. The cost was always there, and it is now visible.

The settlement side matters too. Some providers deposit card takings net of fees, which is where reconciliation errors start: the bank feed shows $9,880, the point-of-sale report shows $10,000 of card sales, and the $120 gap is fees that have to be posted, not written off. We cover the matching logic in the guide to automating bank reconciliation. When the surcharge disappears from the point-of-sale report, the gap stays the same size while gross sales change, so rules built around the old pattern can mis-match.

What about GST on surcharges and merchant fees?

Under the ATO's GST ruling GSTR 2014/2, a credit card surcharge forms part of the consideration for a taxable, input taxed or GST-free supply, depending on the GST treatment of the underlying goods or services. So a surcharge on a taxable sale was taxable, and one on a GST-free sale was GST-free. The ATO notes on the ruling that it is currently under review because of the RBA's 1 October 2026 change.

For the period from 1 October, the GST question mostly disappears on the income side, because there should be no card surcharge to account for. Allowed fees such as public holiday surcharges are part of the price of the sale and follow its GST treatment. On the expense side, claim GST on merchant fees only as shown on the provider's tax invoice or statement. Do not assume a rate. If the October BAS for a quarterly client spans the change, review the September and October surcharge accounts separately so that pre-ban surcharges are not lost in the transition. For the wider BAS workflow, see how BAS preparation can be automated.

What should a bookkeeper check in October's books?

Run these five checks on every client that took card payments, starting with hospitality and retail clients:

1. Search for surcharge income dated on or after 1 October 2026. Any entry is either a terminal or invoice template that was not updated, or a miscoding. Both need a conversation with the client, not a journal.
2. Look for new fee names on card sales. A new "processing", "service" or "admin" fee that appears only on card transactions is likely a renamed surcharge. Flag it.
3. Compare the effective merchant fee rate for September and October. Use total fees divided by card takings. A flat or higher rate after the interchange cuts is a question for the provider.
4. Re-test bank rules for card settlements. Rules that expected gross sales plus surcharge, net of fees, will fail quietly on October deposits. Check that settlement lines still match point-of-sale totals.
5. Tell the client what the profit and loss will show. If surcharges used to be netted against fees, the fee line will rise. Explaining that before the monthly report arrives saves a worried phone call.

These are pattern checks across many transactions and many clients, which is the kind of work suited to AI bookkeeping with a person reviewing the exceptions. A dedicated AI can run the same scan for post-ban surcharge entries and new card-only fee names across every client ledger, and pass only the hits to a person. The judgement call, what to say to the client and the provider, stays with the bookkeeper. If you are wondering how far to trust automated coding in the first place, our post on trusting AI to categorise transactions sets out where it works and where it slips.

What is Agentive's view on the surcharge ban?

Agentive's view is that the surcharge ban is good for bookkeeping, even though it creates a messy October. A surcharge was a second price, applied by a terminal setting, on some payment methods and not others. It was hard to audit and easy to get wrong. One price per item, with the card cost sitting honestly in the merchant fee account, makes the books easier to read.

The cost of the change does not fall on the owner at the counter. It falls on whoever reconciles the ledger in November and finds that half the client base updated their terminals and half did not. That is a volume problem, and volume problems are where the Agentive finance skill earns its keep: every client checked against the same rules, every exception put in front of a person who knows the client. Agentive's AI Employee runs on a dedicated single-tenant server on AWS Sydney, with client data stored onshore and never used to train models, which matters when the job is reading every client's bank feed.

One warning, also from ASBFEO: scammers use periods of change. Expect emails and texts claiming to be from a payment provider and asking merchants to "update" banking details for the new rules. Verify through known contact details, and treat any request to change a settlement account as a red flag until it is confirmed.

One price at the counter, one clean fee line in the ledger

The surcharge ban removed a line from the receipt. It did not remove a cost from the business. For owners, the job is to know the effective fee rate and price on it honestly. For Australian bookkeepers and BAS agents, the job is to close the surcharge account, catch the terminals and templates that did not get the message, and use October's lower interchange caps to check whether a client's provider passed the saving on. Do those five checks this month and the next BAS will be the easiest one of the year. If you want to see how a dedicated AI for bookkeepers would run them across a whole client list, that is a good place to start.

General information for Australian businesses and bookkeepers, not legal, financial or tax advice. Rules are stated as at 12 October 2026 from the RBA, ASBFEO and ATO pages linked above. The worked example is illustrative. Check your own merchant agreement and provider for the rules that apply to your business.