Restaurant owners voice concerns over looming debit surcharge ban
The federal government's plan to ban debit card surcharges by the end of the year is generating increasing unease among small business owners including those in hospitality, who fear they will be forced to absorb significant costs. This initiative, announced by Labor prior to the election to ease cost-of-living pressures, could inadvertently place further financial strain on businesses already grappling with tight margins.
Currently, a 1 per cent surcharge would typically see a customer paying an extra 5 cents on a $5 debit card purchase. Under the proposed ban, businesses like Dan Dick's Melbourne cafes would have to shoulder these charges. With an estimated 600 daily customers, this could amount to around $30 per day, or approximately $10,950 annually for his operation alone.
Dick told Yahoo Finance that he would likely be compelled to increase his prices to offset this added expense. "It’s pretty unfair that they target small business on the behalf of consumers instead of the financial institutions that enact the fees in the first place," he said. "The issue for me is that surcharges were a really convenient way to break down the price structure transparently to show consumers that not all of what they pay is going through to the owner."
David Basheer, owner of the Strathmore Hotel, echoed these concerns, stating he currently passes on around $140,000 in surcharges to customers each year. He told the Australian Financial Review that he would follow suit and build the cost into his prices to ensure the viability of his business. “No business our size can wear that, our margins are far tighter than they were three or four years ago,” Basheer said. “If we can’t have cost recovery through surcharges, then we have to look at other ways."
How the surcharge ban will operate is still under consideration, with the Reserve Bank of Australia (RBA) currently investigating the surcharging landscape. While the government initially aimed for a January 1, 2026 implementation, it is now assessing the potential impact on various stakeholders.
Australian Restaurant and Cafe Association chief executive Wes Lambert warned that if businesses are forced to absorb these substantial costs, they will inevitably have to raise prices. "Small businesses will be demonised because they're the ones that have to do the RBA's dirty work," Lambert said. "They're the ones that have to comply with laws and regulations."
Data from LightspeedHQ reveals that the average Australian eats or drinks out approximately 61 times per year, translating to roughly 1.26 billion transactions annually across hospitality venues, based on the latest census data of over 20.7 million adult Australians. With card payments accounting for 87 per cent of these transactions, the potential financial implications for small businesses are significant.
"Ultimately, those fees will be passed on to consumers in prices that are higher than the 5 cents that you would normally pay for a cup of coffee," Lambert told Yahoo Finance. "The potential surcharge ban is actually going to turn into an inflationary pressure for menu prices. So it will be at least 5-10 cents for a cup of coffee, but more likely, given other costs of doing business pressures, it will be 20 cents or 50 cents, or even higher."
Lambert and other industry leaders are scheduled to consult with the government this week to discuss the potential implementation of the ban.
Jonathan Jackson, 6th May 2025
