The Federal Government is moving to scrap surcharges for payments to government agencies. 

From 1 January 2025, debit card surcharges will no longer be passed on by the Australian Taxation Office (ATO) and Services Australia, following new legislation from the Albanese Government.

The announcement comes after the New South Wales Government revealed in October that Service NSW and Revenue NSW had unlawfully charged merchant fees. 

The federal government quickly launched a multi-agency task force to assess the legality of similar practices at the Commonwealth level. Legal advice confirmed these charges are likely unlawful unless explicitly authorised by legislation.

Finance Minister Katy Gallagher and Assistant Treasurer Andrew Leigh plan to introduce the Commonwealth Entities (Payment Surcharges) Bill 2024 this week. 

The legislation aims to tidy up this long-standing oversight without adding new fees. It will also give the finance minister the authority to update surcharging policies as needed.

“The practical benefit to Australians is that they will save money because they won’t be charged a fee simply to use their debit card,” the ministers said.

The legislation will apply retroactively to 1 January 2003, aligning with when the Reserve Bank of Australia (RBA) began regulating payment surcharges. 

The RBA originally enabled surcharging to make transaction costs more transparent and to curb excessive interchange fees set by credit card companies. However, surcharging has since crept into debit card payments, where risks and processing costs are lower. 

Critics argue this has effectively penalised consumers for the most straightforward transactions.

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