From October 1st, surcharging card payments becomes illegal in Australia. If you currently pass card processing costs on to your customers, this changes how you'll need to handle those costs — but it changes far less than most people assume. This guide explains exactly what's happening, walks through the numbers, and lays out the options that keep you compliant and protect your margin.
This is general information to help you understand the change, please confirm your specific approach with your own advisor.
Summary
Distributors can no longer add a card surcharge to a customer's bill. While the cost of processing card payments still exists, it just sits with the merchant instead of being passed to the buyer.
That's the entirety of the change. Everything else below is about understanding why, and what to do about it.
Surcharges vs Processing Fees
The confusion almost always comes from blending two different things together. They're not the same.
A surcharge is the act of passing the cost of card processing on to your customer - the buyer pays the fee instead of you. This is what's being banned.
A processing fee is the actual cost of moving money through the card networks (Visa, Mastercard, eftpos, and the banks behind them). Someone always pays this cost. It's a real, unavoidable cost of accepting cards, and it exists no matter which provider you use.
The law is changing who is allowed to absorb the processing cost and not whether the cost exists. After October 1, the merchant absorbs it. The cost itself doesn't go up, down, or away.
This applies to every business that accepts cards and every payment provider in the market. It is not specific to any one platform.
A worked example
Say one of your customers places a $10,000 order and pays by card, and card processing runs at roughly 1.5%.
| Today (surcharging allowed) | From 1 October (surcharging banned) |
Order total | $10,000 | $10,000 |
Processing cost (~1.5%) | $150 | $150 |
Who pays the $150 | The customer (added as a surcharge) | You, the seller |
What the customer sees | $10,150 | $10,000 |
Figures are illustrative, your actual rate depends on your payment mix and provider.
Notice what doesn't change: the $150 cost is identical in both columns. The only difference is which side of the transaction carries it. That's why no provider can make the cost smaller by "removing the surcharge." The surcharge was never the cost; it was just the mechanism for passing the cost along.
Why your provider's fees stay the same
Your payment processing fee covers the real work of moving money through the card networks and into your account. It is not a surcharge, and it is not an extra charge on top of the goods you sell, it's the cost of the payment rail itself.
Because the ban targets passing the cost to the buyer and not the cost of processing, there's no lever in the legislation that reduces what card acceptance actually costs. Anyone telling you their fees should now drop to zero is conflating the two ideas above.
The good news: there are real, legitimate ways to recover these costs and even reduce them. That's the rest of this guide.
What Distributors Can Do
You can't surcharge cards anymore, but you have several compliant ways to manage and recover processing costs. Most distributors will use a combination of these.
1. Build the cost into your pricing
The simplest and most common path. Rather than itemising a card fee at checkout, fold processing into your margin or list pricing. Your prices already account for plenty of input costs; payment acceptance becomes one more. This keeps you fully compliant because there's no separate surcharge - it's just your price.
2. Consider a general service or account fee
Some distributors are weighing a flat service or account-keeping fee that applies broadly and isn't tied to the card transaction. Whether this is permissible depends on your customer contracts and the specifics of the regulation, so confirm it with your own advisor before you roll it out.
3. Move volume to lower-cost payment methods
This is the lever that actually shrinks the cost rather than just relocating it. Card payments are the expensive way to get paid. Bank-based payments cost a fraction of card processing, so every customer you move off cards directly reduces the cost the ban now puts on you.
This is where PayTo comes in (see below).
How Pepper helps you protect your margin
The real issue isn't the rule, it's that the processing cost lands on you now instead of your customer. So that's where we're focused:
Cutting the cost at the source with PayTo. PayTo lets your customers pay you directly from their bank account at a fraction of card processing costs. The more volume you shift from cards to PayTo, the less the surcharging ban actually costs you. This is the single biggest lever available to you, and we're rolling it out so you can put it to work. (Your CSM can share current card vs. PayTo rates and timing for your account.)
Setting you up before the deadline. Your CSM will work through your pricing and fee configuration in Pepper with you directly so your costs are recovered compliantly, without a checkout surcharge, configured and tested ahead of 1 October rather than left for you to reverse-engineer.
Frequently asked questions
Will Pepper's fees go down now that surcharging is banned? No. Our fees cover the real cost of processing payments, which is unchanged. The ban affects who can absorb that cost, not the cost itself. The same is true for every provider.
Isn't your fee a surcharge, since you're charging us for card transactions? No. A surcharge is passing the processing cost on to the buyer. Our fee is what it costs to process the payment in the first place — the cost of the rail, charged to the merchant. Those are two different things, and only the first one is affected by the ban.
Does this only apply to Pepper customers? No. The ban applies to all merchants and all payment providers in Australia. It's a regulatory change, not a Pepper policy.
Can I still recover my processing costs somehow? Yes — just not as a card surcharge. You can build the cost into your pricing, look at a general (non-card-tied) service fee, and shift volume to lower-cost methods like PayTo. See the options above, and confirm specifics with your advisor.
What's the one thing I should do to reduce these costs? Move customers onto bank-based payments like PayTo. It's the only option that lowers the actual cost rather than relocating it.
Who do I talk to with questions about my account? Your Pepper CSM is the best person to start with. They can walk through your specific setup and bring in our payments team where it's useful.