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A year ago, we wrote about the ban on excessive surcharges, which has applied to large businesses since 1 September 2016. Now the ban will extend to all businesses, including small businesses. Starting from 1 September 2017, small businesses will have the same obligations as large businesses to comply with the ban — and will face heavy penalties for non-compliance. We briefly explain how small businesses can prepare for the new laws.

Definition of a Small Business

“Small business” is defined by exclusion: all businesses that do not meet the definition of a “large business” are considered small businesses. The ban will apply to these businesses from 1 September 2017.

As a recap, for the purposes of the laws, a business is large if it meets at least two of these thresholds:

  1. its consolidated gross revenue for the financial year ending 30 June 2015 was $25 million or greater;
  2. the value of its consolidated gross assets at 30 June 2015 was $12.5 million or greater; or
  3. the business had 50 or more employees at 30 June 2015.

If you meet at least two of the above threshold requirements, you should already be familiar with the ban — because it will have applied to your business since 1 September 2016.

Payments Affected by the Ban

The ban only applies to certain payments that have been decided by the Reserve Bank of Australia (RBA) and set out in the RBA Standard. The RBA determines the standard processing costs for a business when accepting payment by debit or credit card. The permitted surcharge levels are measured according to these standards.

The ban captures the following payment types:

  • Eftpos (debit and prepaid);
  • Mastercard (credit, debit and prepaid);
  • Visa (credit, debit and prepaid); and
  • American Express companion cards (American Express cards issued by an Australian financial service provider, rather than issued directly by American Express).

Payments which are not captured by the ban include:

  • BPAY;
  • PayPal;
  • Diners Club cards;
  • UnionPay;
  • American Express cards issued directly by American Express; and
  • cash and cheques.

However, these payments may have their own rules or terms and conditions that aim to limit the surcharge amount applied to them.

Passing Costs on to Customers

A business is only permitted to pass on to the customer the “cost of acceptance” for a payment. The RBA Standard lists the elements that make up the cost of acceptance and include:

  • merchant fees;
  • fees which are paid to rent and maintain the business’s payment card terminals; and
  • other processing fees, such as switching fees, cross-border transaction fees or fraud-related chargeback fees.

There are also costs paid to other service providers which can be passed on to the customer as a surcharge. However, these additional costs are limited to:

  • gateway fees;
  • fees for fraud protection services;
  • card terminal fees paid to other parties; and
  • fees for forward delivery risk insurance.

Failing to Comply with the Ban

The Australian Competition and Consumer Commission (ACCC) can issue an infringement notice if it believes that a business has failed to comply with the ban on excessive surcharges. The fine will depend on the type of business, as set out in the table below.

Business Penalty Unit Fine (as at August 2017)
Listed corporation 600 penalty units $108,000
Body corporate 60 penalty units $10,800
Person other than body corporate 12 penalty units $2,160


The ACCC also has the power to take court action against a business and seek pecuniary penalties, which are monetary fines that a court imposes. Again, the penalties depend on the business involved, as set out in the table below.


Business Penalty Unit Fine
Body corporate 6, 471 penalty units $1,164,780
Person other than body corporate 1, 295 penalty units $233,100


The ACCC can also seek injunctions and other orders in court.

Key Takeaways

Small businesses should start reviewing their surcharge levels now to prepare for the ban. LegalVision is offering a new service, the Surcharge Checker, to assist all businesses — small and large — to understand their obligations and to comply with the new rules.

If you have any questions about the ban on excessive surcharges, get in touch with LegalVision’s consumer lawyers today on 1300 544 755 or fill in the form on this page.


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