NSW government collected $144m in unlawful merchant transactions

Aussies have lost an estimated $144m to illegal merchant levies, one state government has admitted.

Illegal merchant fee surcharges have swiped an estimated $144m from NSW residents in the past eight years, the state government has admitted.

The unlawful levies were collected from the Service NSW and Revenue NSW agencies across tens of millions of customer card transactions.

In a statement from Wednesday, the government said the issue was first identified by the NSW Auditor-General during settlement of the Department of Customer Service financial statements for 2023-24 and then brought to the attention of the current administration.

“The current Secretary of DCS, Graeme Head, sought further information from his Department which revealed that Service NSW’s practice of charging merchant fees had been flagged as unlawful in legal advice received from the Crown Solicitor’s Office between February 2016 and December 2022,” the statement reads.

“Despite this, merchant fees continued to be passed onto customers.”

Merchant fee surcharges are levied to recoup transaction fees charged by payment providers including banks, the statement added.

Finance Minister Courtney Houssos has written to the NSW Ombudsman to request an investigation into the illegal levies fiasco. Picture: NewsWire/ Monique Harmer

Typical surcharges on Service NSW transactions include 30c for a 1-year licence renewal, 29c for a marriage certificate and $1.92 to renew registration for a small car, such as a Toyota Corolla.

The average surcharge on a Revenue NSW payment in 2023-24 was 92c.

The government estimates some 92 million transactions unlawfully incurred about $144 million in merchant fees from 2016 across Service NSW and Revenue NSW.

Finance Minister Courtney Houssos said the government was now working to “switch off” payment methods that charged merchant fees.

“We have acted swiftly to establish a taskforce to deal with this issue,” she said on Wednesday.

“Our immediate efforts are focused on switching off the payment methods that charge these merchant fees as quickly as possible.

“We will get to the bottom of what happened and why millions of people were unlawfully charged merchant fees.

“Families, households and businesses expect governments to conduct themselves lawfully. That’s why all agencies have been instructed to examine their own processes.”

Customer Service and Digital Government Minister Jihad Dib, Treasurer Daniel Mookhey and Houssos have written to the NSW Ombudsman requesting an investigation into possible serious maladministration.

The Ombudsman holds investigation and oversight powers for the state’s public administration.

The Secretary of DCS has also referred the matter to the Ombudsman and the Independent Commission Against Corruption.

“It is deeply concerning that this practice has been ongoing, despite legal concerns being raised,” Mr Dib said.

“While the individual amounts typically charged may appear to be small, they have been charged unlawfully.”

Originally published as NSW government collected $144m in unlawful merchant transactions