A reform designed to save shoppers a few cents at the checkout may end up costing the building industry something far more valuable: working capital. The card surcharge ban builders have been dealing with since 1 October is a retail-focused change. But it is landing on an industry already under insolvency pressure, and on a housing target that is slipping further out of reach.
What the ban does and who it was aimed at
The ban followed the Reserve Bank’s review of merchant payment costs. It took effect on 1 October. Card networks used the new freedom to forbid surcharging altogether. Merchants still carry the cost of accepting cards, so many may simply fold it into their prices. Around 16% of businesses had been surcharging before the change.
That is a sensible-sounding policy if you picture a cafe or a retailer. It looks very different if you run a small building firm paying subcontractors and suppliers on tight terms.
Why credit cards matter on a building site
Builders’ representatives say credit has become a cash flow tool, not just a convenience. A card can bridge the gap between paying for materials and being paid by a client. When surcharging is banned, the cost of that tool is harder to pass on, and it may be harder to use at all.
A property financier made the broader point that credit underpins construction. That is a fair description of how the sector works. Margins are thin, progress payments arrive late, and a few weeks of delayed cash can separate a viable job from a distressed one.
The industry groups say this lands on top of rising costs and compliance burdens, and have urged the government to reverse the ban. A small business body took a more measured view: only a minority of firms would be affected, but the impact on them would be significant. Both things can be true. A minority of firms can still be the ones that deliver a meaningful slice of new homes.
Key numbers
- 1 October: date the surcharge ban took effect
- Roughly 16% of businesses were surcharging before the ban
- 2.3% of tax office collections came via credit card in 2024-25
- Almost 95,000 dwellings short of the 1.2 million-home target after two years
- About 130 homes a day below the required pace
- Forecast shortfall of 186,000 homes, with an estimated $11 billion in uncollected stamp duty and GST
The government’s own contradiction
The policy has already produced an awkward moment for its authors. The tax office cannot reprice legislated liabilities, so its commissioner said it would stop accepting credit cards from 30 November. The government has since postponed that move to July 2027.
Credit cards made up just 2.3% of collections in 2024-25, so the revenue risk is small. The political risk is not. The opposition leader seized on the contradiction, and the prime minister had promised savings with every tap. If the government itself cannot absorb card costs without changing its own arrangements, it is hard to argue that small builders should simply cope.
Where this meets the housing target
The wider backdrop is what makes this more than a payments story. Industry analysis shows the country is almost 95,000 dwellings short of the 1.2 million-home target after two years. That works out to about 130 homes a day. The forecast miss is 186,000 homes, with an estimated $11 billion in uncollected stamp duty and GST attached to it.
Supply is already constrained by approvals, labour and costs. Our guide to housing supply, approvals and building costs walks through those bottlenecks. Another source of friction for small operators does not help, particularly when the home building pipeline is already thinning.
What could derail the concern
There are reasons not to overstate this. Only a minority of firms rely heavily on cards, and the figure that most builders surcharged is not supported by the data we have. Some may adjust pricing, shift supplier terms or move to other finance. The effect on actual completions is unproven, and no one has yet measured it.
There is also a fair counter-argument. Surcharges were a cost to consumers, and banning them was meant to make prices clearer. Reversing the ban for one industry would open a precedent that other sectors would line up to claim.
The practical read is this: the ban is unlikely to move the national housing numbers by itself. But it is one more squeeze on the businesses that have to build the homes. If you work with or invest alongside smaller builders, check how exposed their payment terms are to card costs. If you are tracking supply, treat insolvency data and progress payment practices as early signals, not afterthoughts.
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General info, not financial advice.
