Reserve Bank Surcharge Ban Threatens General Practice Profit Margins
Small businesses across Australia face mounting financial pressure following the Reserve Bank of Australia’s ban on card payment surcharges, which took effect on 1 October. The policy eliminated the ability of businesses to discriminate between payment types by levying fees for card transactions while leaving cash free of charge. However, payment terminal providers continue to impose merchant fees on businesses, leaving operators like Canberra practice owner Dr John Deery to absorb costs that threaten standard profit margins, Medical Republic reported.
Dr Deery, chair of the Australian GP Alliance, stated that his clinic group generates approximately $20 million in annual revenue. Merchant fees typically account for about 1% of card-based payments, creating an annual expense of $200,000 for his practice group. Operating margins for most general practice clinics sit at roughly 10%, meaning that absorbing these fees directly cuts into operational profits.
Card Fee Absorption and Price Hikes Across Clinics
Before the regulatory change, patients could choose cash to avoid transaction fees or select specific cards based on cost. Approximately one-third of patients utilized high-cost frequent flyer rewards cards, one third used standard credit cards without rewards, and one third opted for debit cards carrying the lowest transaction fees. Dr Deery noted that the removal of visible surcharges strips away patient transparency regarding these processing costs.
To mitigate the impact, Dr Deery adjusted clinic pricing upward across the board by 1.2% to split the difference between various credit card surcharges. He anticipates that without visible fees at the point of sale, patients will naturally default to higher-tier rewards cards because transaction costs are no longer immediately apparent to the consumer.
General practices are not alone in managing these financial strains. The Australian Chamber of Commerce and Industry and the Council of Small Business Organisations Australia continue to raise alarms regarding the surcharge ban.
Relief remains limited, though a recent government intervention offers a precedent. Following heavy lobbying, Treasurer Jim Chalmers intervened after the Australian Taxation Office decided to stop accepting credit card payments to avoid merchant fees triggered by the surcharge ban. The federal government provided additional funding to the ATO to subsidize those merchant fees until the funding runs out on 30 June 2027.
Council of Small Business Organisations Australia chair Matthew Addison called the ATO decision an important acknowledgment of the significant impact removing payment options has on small businesses. Addison argued that if credit card acceptance costs warrant intervention for the ATO, the government must recognize identical cost burdens imposed on small businesses operating on tight margins.
Frequently Asked Questions About the Card Surcharge Ban
Which businesses are affected by the Reserve Bank of Australia surcharge ban?
The ban applies nationwide to small businesses across various sectors, including general practice medical clinics, retail stores, and service providers that previously levied card payment surcharges to offset merchant terminal fees.
How much do merchant fees typically cost medical practices?
Merchant fees normally account for about 1% of money paid by card. For a clinic group generating $20 million in revenue, this translates to roughly $200,000 annually, which can consume a significant portion of typical 10% operating profit margins.
What financial relief has the federal government provided so far?
Treasurer Jim Chalmers provided additional funding to subsidize merchant fee costs for the Australian Taxation Office after the agency considered stopping credit card payments. This targeted government subsidy for the ATO is scheduled to run until 30 June 2027.
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