Australia card surcharge ban raises shadow economy and fee concerns

New credit card surcharge reforms in Australia are projected to save consumers approximately A$1.6 billion annually. However, the ban has sparked concerns regarding the potential expansion of the shadow economy. As businesses continue to incur card processing costs, some are opting to offer cash discounts, which could reverse years of declining cash usage and facilitate tax evasion.

Official estimates suggest Australia’s shadow economy is roughly 3% of GDP, or about $80 billion in 2025, with CPA Australia estimating an $11 billion annual gap in missing taxes. The hospitality sector is noted as a significant area of concern for unreported Goods and Services Tax (GST) revenue.

Simultaneously, analysis suggests that many financial institutions have not yet passed on the benefits of new interchange fee caps set by the Reserve Bank of Australia (RBA). While the RBA estimates the reduction in credit card interchange fees from 0.8% to 0.3% will save merchants $910 million per year, a study by But Compayr found that only seven out of twenty popular card acceptance schemes have actually reduced merchant fees.