Direct Debit Rules in Australia: What Your Business Must Do

In The Subscription Playbook I make the point that the best subscriptions are the ones customers barely have to think about. Payment just happens. For a lot of Australian businesses, that's direct debit.

It's cheap, it doesn't expire like a card, and it's familiar. But "set and forget" for the customer only works if the business has set it up properly. This guide explains the rules for BECS direct debit, the bank-account debits most businesses use, plus PayTo, the newer alternative, as at October 2026.

It's general information, not legal advice. Your payment provider's own terms are part of the rules too, so read them alongside this.

How direct debit works in Australia

Most direct debits run through BECS, the Bulk Electronic Clearing System, administered by the industry body AusPayNet. Your business is the "debit user". You either sponsor through your own bank or, more commonly, use a provider such as Ezidebit, GoCardless, Stripe, Debitsuccess or your gym or practice software's payment partner.

To debit a customer's account you need two documents:

1. The Direct Debit Request (DDR). The customer's authority for you to debit their account.
2. The DDR service agreement. The terms that govern the arrangement: amounts, timing, changes, cancellations, disputes and fees.

Your provider will usually supply both. Your job is to make sure your sign-up process presents them properly and that your own membership or service terms don't contradict them.

What the service agreement must cover

Based on AusPayNet's guidance and the standard agreements providers use, a DDR service agreement should explain:

• What will be debited and when, or how the customer will be told if amounts or dates vary.
• How much notice you'll give before changing the terms. GoCardless's guide to the BECS requirements describes this as at least 14 business days. Stripe's own agreement commits to 30 days. Use whichever is longer in your provider's terms.
• How the customer can change, defer, stop or cancel debits. Customers must be able to do this by contacting you or their financial institution.
• How to dispute a debit they think is wrong, again through you or their bank.
• What happens if a debit day isn't a business day. Usually it's processed the next business day.
• What happens if a debit is dishonoured, including any fees.
• How you'll keep their details private.

Setting up a DDR online or by phone

Most businesses now collect DDRs online. AusPayNet's guidelines (2019) for establishing DDRs electronically or by telephone recommend good practice (they say the BECS Procedures and your sponsor agreement take priority), including:

• Make the DDR terms and service agreement available to the customer when they give the authority.
• Make sure the person has authority to operate the account, using a reliable method of verification and authorisation.
• Validate the BSB and capture the account name, BSB and account number accurately.
• Within 7 days, give the customer a copy of the DDR and service agreement in a form that can't be changed, such as a PDF by email, and keep a record that you did.
• Keep the DDR records for 7 years after the last debit.
• For business customers, record the ABN and, where possible, confirm the signatory's authority.

Can customers cancel through their bank?

Yes. This is the rule most often misunderstood by businesses and, according to consumer groups, sometimes by banks too.

The service agreement must allow customers to stop or cancel a debit by contacting either the business or their own bank. Consumer advocates such as Consumer Action Law Centre have long published guidance reminding people they can cancel through their bank.

What cancelling the debit doesn't do is end the customer's contract with you. If they still owe money under a valid agreement, they still owe it. But you can't keep debiting their account after they've withdrawn the authority, and you can't insist they cancel in person or only by letter to you.

A practical tip: if a customer cancels through their bank, you'll usually see it as a failed or rejected debit. Contact them straight away. Often they wanted to cancel, and the right response is to process it cleanly. Sometimes they changed banks and just need to update their details.

Dishonour and failed payment fees

You can charge a fee when a debit fails, if it's disclosed in your terms. Keep it reasonable:

• Disclose it upfront in the service agreement and your terms.
• Keep it close to your actual cost, including the provider's fee and the time spent following up. A fee that's far more than your loss risks challenge as an unfair contract term or a penalty.
• Don't stack fees. Charging a dishonour fee every time an automatic retry fails can turn A$10 into A$50 quickly.

Stripe's BECS agreement also says the arrangement may be cancelled after three consecutive dishonours, after which the business arranges another payment method. Providers set their own limits, so check yours.

Changing the amount: price rises and notice

If you're raising prices for members on direct debit, you need to:

1. Have a contract that actually allows the change.
2. Give notice under your service agreement before the new debit amount applies, at least the period your provider requires.
3. Give customers a fair chance to cancel before the increase if they don't want it.

From 1 July 2027, the subscription-trap rules add specific notice requirements. My guide to price increase rules in Australia covers how to do it well.

PayTo: the newer alternative

PayTo runs on the New Payments Platform (NPP). Instead of filling in a paper or web DDR, the customer approves a payment agreement inside their own banking app.

What's different, according to Stripe's guide:

• Customers see and control the agreement in their banking app. They can pause, change or cancel it themselves.
• Payments settle in near real time, including weekends, instead of in business-day batches.
• Most failures, such as a cancelled agreement or insufficient funds, show up at the time of payment, rather than days later.

For the customer, PayTo makes cancelling as easy as subscribing, which lines up with where the law is heading. For you, faster confirmation can mean fewer surprises. Not every bank and provider supports every PayTo feature yet, so check before you switch.

Fees: what direct debit costs

Direct debit is usually cheaper than cards. As one example, Stripe's published Australian pricing as at October 2026 is 1% + A$0.30, capped at A$3.50 for BECS Direct Debit and the same for PayTo, compared with 1.65% + A$0.30 for domestic cards. Specialist providers like Ezidebit and GoCardless have their own pricing, often with per-transaction and dishonour fees. Compare the total cost, including failures, in our guide to payment processing fees in Australia.

The 2027 subscription-trap rules

From 1 July 2027, the Competition and Consumer Amendment (Unfair Trading Practices) Act 2026 adds specific duties for subscriptions sold to consumers (and small businesses on standard form contracts): clear disclosure at sign-up, prescribed notices during the subscription, and an easy way to cancel, online if they joined online.

These sit on top of the direct debit rules. A compliant DDR doesn't make a hard-to-cancel membership compliant. Read Australia's subscription trap laws and cancellation rules.

Your direct debit checklist

1. Use your provider's current DDR and service agreement, and read it.
2. Show both to customers before they authorise the debit.
3. Send a non-editable copy within 7 days of an online or phone sign-up.
4. State debit amounts, dates and how variable amounts are notified.
5. Say clearly that customers can cancel through you or their bank.
6. Disclose any dishonour fee and keep it close to your real cost.
7. Give at least the required notice before changing terms or amounts.
8. Keep DDR records for 7 years after the last debit.
9. Follow up rejected debits quickly, and process genuine cancellations cleanly.
10. Get ready for the 2027 subscription rules now.

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• whether a subscription model could work for your business
• how recurring revenue could cover your fixed costs each month
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Book my free review Call 1300 272 422

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Robert Coorey, MBA

Robert is the author of The Subscription Playbook and Feed a Starving Crowd and a Director at BPAG Accountants in Sydney. More about Robert.