By Chris O'Keefe
Australians have been charged billions of dollars in illegal merchant fees for federal government services, in a major financial scandal uncovered by the Albanese government.
Fees amounting to billions of dollars have been charged over two decades, dating back to the Howard government era, for the use of credit cards and debit cards to pay for services such as visa applications and tax bills.
The use of Visa and Mastercard debit cards to pay for government services has been illegally attracting merchant fees since the Howard government era.Credit: Christopher Pearce
However, government sources say there are no plans to refund people charged extra for using their cards, due to the challenges of auditing tiny merchant fees across government services over so many years.
Merchant fees are tiny charges made by the companies that provide the entire electronic payment system such as credit card companies and specialist networks.
The NSW government confronted the same issue in October when it uncovered 92 million Service NSW and Revenue NSW transactions that had attracted $144 million in illegal merchant fees from 2016 onwards.
This prompted the Albanese government to look into federal payments, uncovering illegal merchant fees dating back as far as the Howard government.
Legal advice provided to Finance Minister Katy Gallagher has confirmed that Commonwealth laws prohibit the government from collecting payment surcharges when people pay a tax or fee.
Government sources say there are no plans to refund people charged extra for using their debit cards.Credit: Michael Howard
The Australian Taxation Office now charges a 0.4 per cent merchant fee for Visa debit cards and 0.2 per cent for Mastercard debit cards.
Laws will be introduced on Monday to retrospectively make these surcharges legal. However, the government will put an end to surcharges on debit card payments for services at the Tax Office and Services Australia from January 1 next year.
Charges for the use of credit cards to pay for government fees and services will remain.
A joint statement from Gallagher, Treasurer Jim Chalmers and Assistant Treasurer Andrew Leigh said the new laws would “not impose any new surcharges but fix the historical issue to ensure existing surcharges are authorised by legislation”.
“While the Reserve Bank of Australia completes its important work on the surcharging review and how payment fees can be reduced economy-wide, we will stop passing on debit surcharges from the ATO and Services Australia to make sure these everyday payments don’t cost Australians more.”
A source with knowledge of the situation, who asked to remain anonymous to speak freely, said it would be impossible to calculate what individuals are owed.
In NSW, it is estimated every citizen in the state is owed about $30, but there are no plans for refunds. The state’s Finance Minister, Courtney Houssos, has blamed the state’s former Coalition government for ignoring clear advice from the crown solicitor in 2016, which stated the practice was illegal.
In October, Prime Minister Anthony Albanese announced a crackdown on excessive card surcharges, both in-store and online, providing $2.1 million in new funding for the Australian Competition and Consumer Commission (ACCC) to address excessive surcharges and improve payment fee transparency. This funding will also support the ACCC in cracking down on illegal surcharging practices and increasing public education and compliance efforts.
A spokesperson for Shadow Treasurer Angus Taylor said the Coalition would examine details of the legislation when it is introduced into the parliament.
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correction
An earlier version of this story incorrectly said that passport renewals were subject to merchant fees. The Department of Foreign Affairs and Trade does not charge customers merchant fees for passports.