Labor ministers are at odds over the tax office’s ban on credit card payments that small businesses warn will cause cashflow problems and see consumers pay more for restaurant meals and takeaway coffee.

From December 1, the Australian Taxation Office will stop accepting credit card payments.

A ban on credit and debit card surcharge fees for consumer transactions came into effect a week ago, covering fees on top of what it costs to do the actual transaction.

The Opposition, teal MPs and business groups, including the Australian Chamber of Commerce and Industry, are calling on the ATO to reverse this move, announced a week ago, arguing it will create cashflow problems for small businesses that have a tax liability, potentially meaning higher prices for customers going out to a restaurant as costs are passed on during a time of high inflation.

A united opposition to the credit card ban could potentially see Labor make yet another backdown, like it did with the capital gains tax on start-ups and taxing unrealised gains on superannuation, with Treasurer Jim Chalmers absent from media conferences on Thursday.

Housing Minister Clare O’Neil has joined Small Business Minister Anne Aly in calling on the Australian Taxation Office to reconsider its planned ban on accepting credit card payments and be more conciliatory with business.

“We really want the ATO to go back and talk to business about what they’ve decided to do here and think about how they can find a solution that works,” Ms O’Neil told Nine’s Today show on Thursday.

“We have a simple principle and that is that you should not be charged to use your own money, and that’s a good thing for Australians.”

Just 25 minutes later, Assistant Minister for Science, Technology and the Digital Economy Andrew Charlton, often touted as a future treasurer to replace Dr Chalmers, declared his support for the ATO’s controversial credit card payment ban, arguing the tax office offered flexible payment plans to deal with cashflow shortfalls.

“I’ve seen that decision by the tax office and the reason for that decision is that the Government has said that if we’re going to stop businesses from applying these surcharges, then it’s appropriate to be consistent and for government agencies to not have these surcharges as well,” he told ABC Radio National.

“The ATO has made a decision and that decision is that they don’t want the people who are not paying by credit card, which is 98 per cent of taxpayers, to be subsidising those that do.”

“Yes, the Government supports the ATO’s decision.”

Dr Charlton said he understood cashflow challenges as a millionaire former prime ministerial adviser to Kevin Rudd who established and sold his AlphaBeta consultancy to global giant Accenture, before going into politics in 2022.

“I had my own small business, and I know that flexibility in cashflow is very valuable. I’ve been in that situation where the tax bill is due, and the wages bill is due, and the rent bill is due, and you look at your bank account and there isn’t enough money in the bank account to pay all those bills,” he said.

“It’s important for small businesses to know that the tax office does have options for flexibility in payment. The tax office offers payment plans for small businesses and the good thing about those payment plans is that the cost of those plans, the interest rate on those plans, is much lower than the interest rate on credit cards.”

Colourful Sydney restaurateur Nahji Chu said the tax office’s credit card ban would create cashflow problems for small businesses.

“All of a sudden this week you can’t pay your ATO bill with your credit card. So for a small business, that’s cashflow,” she told Today.

“It’s cashflow and it means breathing space each month. So, it just means, okay, so if you can pay $10,000 on your credit card, it means a whole month of breathing space so you can bring more money in from revenue.

“But if revenue’s coming in and you don’t have the credit card facility, of course you’ve got to increase your prices.”

Opposition Leader Angus Taylor described Dr Charlton as the “de facto treasurer” in the absence of the actual Treasurer, Dr Chalmers.

“Where’s Jimmy on this one? You know what they should do is just axe the ban,” he told reporters in Sydney on Thursday.

“Just get rid of the ban. They are asking small businesses to absorb the surcharges and then they refuse to absorb the surcharge.

“The hypocrisy of this knows no bounds.”

Shadow treasurer Tim Wilson said businesses would have to change their whole cashflow structure.

“So, you can imagine a lot of small businesses between GST, between, that and of course things like income tax, suddenly turn around, they’re getting smashed, and remember, this isn’t the first time the Government has turned around to small businesses and said, ‘You’ve got to constrain your financing options,” he told News24.

Australian Chamber of Commerce and Industry chief executive Andrew McKellar said the ATO had refused to budge, following a meeting with business leaders on Wednesday.

“The ATO is saying they’re not negotiating the decisions made. They’re talking about implementation and how that’s going to happen,” he said.

“I think from a small business point of view, the message is ‘like it or lump it, you have to put up with it’. And not surprisingly, many of the small businesses that we’re talking to are absolutely furious. It will have a big impact on them.”

Independent MPs Kate Chaney, Allegra Spender and Dai Le have also spoken out against the ATO’s credit card ban.

“Credit cards are one way businesses manage cashflow when a tax bill lands. Removing that option with around eight weeks’ notice makes things harder,” Ms Chaney said.

Ms Spender, who ran her late mother Carla Zampatti’s fashion business before being elected to Parliament four years ago, said credit cards were often a lifeline for small business.

““The use of credit cards by small business to pay tax bills might be small, but having the option is essential,” she said.

“Managing cashflow is difficult at the best of times and businesses need to have the flexibility offered by credit.”

Ms Le slammed the tax office for failing to provide alternative payment methods.

“I don’t suggest that the taxpayer should foot the bill, but, the ATO must provide clear communication, accessible alternatives, flexible payment plans and genuine hardship support for the businesses that need it, to transition away from card payments without further hurting their bottom line,” she said.

Dr Chalmers is facing pressure to act after another Labor MP Jerome Laxale noted there was a “strong backlash” against the ATO’s credit card ban, signalling Government intervention.

“I also note that there’s been a strong backlash to it, and you know governments need to listen to that too,” he told News24 on Friday last week.

The Reserve Bank of Australia in March announced a ban on surcharges on debit, credit, EFTPOS, Mastercard and Visa payments would be coming into effect on October 1.

This ended a 23-year arrangement where consumers had paid surcharge fees on top of what it cost to do the actual transaction.

“Because the cost of doing card payments, processing card payments, has gone down, then there’s no reason why consumers should be paying more after this change, including the price and the surcharge, than they were paying before,” Dr Charlton said.

Prime Minister Anthony Albanese last week made a social media video claiming surcharge fees were costing Australians $1.6 billion a year.

The cap on interchange fees, or the cost of processing a transaction, was reduced from 0.8 per cent to 0.3 per cent at the start of this month.