Government races to end illegal ATO surcharges
Urgent legislation introduced this week will aim to validate billions in historical fees charged by federal agencies and end the practice from 2025.
The government is introducing an urgent law in parliament this week to stop surcharges on ATO payments after it emerged that taxpayers were illegally charged fees by Commonwealth agencies for decades.
Reports indicated the total amount of illegal merchant fee charges was in the billions and dated back to the Howard government era.
In a statement on Friday, the government confirmed that the ATO and Services Australia would stop charging merchant fees on debit card payments from 1 January 2025.
“The Albanese Labor government will stop passing on debit surcharges from the ATO and Services Australia to make sure these everyday payments don’t cost Australians more from 1 January,” the statement from Finance Minister Katy Gallagher, Treasurer Jim Chalmers and Competition Minister Andrew Leigh said.
The ATO currently charges a 0.4 per cent fee on Visa debit transactions and 0.2 per cent on Mastercard debit payments.
The issue was discovered by the government after NSW authorities revealed in October that state agencies had been unlawfully collecting similar charges.
A multi-agency taskforce was set up shortly after to examine the practice at a federal level, with Minister Gallagher having received legal advice that confirmed Commonwealth laws prohibited the government from charging anyone when they paid taxes or fees.
To address the issue, the government said it would introduce the Commonwealth Entities (Payment Surcharges) Bill 2024 this week.
The legislation would apply retrospectively from 1 January 2003, effectively legitimising two decades of surcharge collection, while at the same time banning the practice of passing them onto taxpayers.
“This new legislation will provide the finance minister with the power to quickly and efficiently amend Commonwealth surcharging policies, including to stop Commonwealth agencies passing on debit card surcharges,” the joint statement said.
“These Bills will not impose any new surcharges but fix the historical issue to ensure existing surcharges are authorised by legislation.”
However, according to reports from Nine newspapers, there are currently no plans for refunds due to the challenges of auditing the fees across government services over many years.
It comes after the government announced $2.1 million in funding to the ACCC in October to crack down on banks and payment services providers issuing debit card surcharges.
The government committed to banning the practice entirely by 1 January 2026, subject to a review underway by the Reserve Bank of Australia.
“It might seem like a small charge every time you tap and go, but it punches a big hole in your wallet at the end of the year when you add up all of those fees,” Assistant Treasurer Stephen Jones said.
“Clearly, there's excessive charging going on here [and] we want to get to the bottom of it.”
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