Senate Economics Legislation Committee, , 6:04:01 to 6:14:51
Examination of the impact of the surcharge ban on small businesses, the government's decision to extend the implementation timeframe, and the role of the Reserve Bank in the process.
Topics: Government spending, Cost recovery
Speakers: Hon Katy Gallagher, James Kelly, Senator Andrew Bragg, Senator Dean Smith, Senator Lisa Darmanin
Well, we're all machine down there, isn't it? So look, um I've I've dug into the into the annals of time here. You know, I've gone back to dig up what we talked about on the 4th of November 2024 here in this committee. Um and helpfully, Minister, you were here and um we had an exchange, and I said to you, um, is there a risk that small businesses will have to absorb some of the costs? And you said that there's some of the issues we need to work through. You remember saying that? And then I said um, but you've already announced that the Prime Minister of the Country announced this, and you said yes, and in the announcement, I think it makes clear we want to ease costs for consumers that added costs for small business or unintended consequences for the broader economy. So did you do that work that you said you do? You said that you would make sure there wouldn't be added cost for small business, and there wouldn't be unintended consequences.
I would have to review um that hands up, no, I don't recall that exchange, Senator Bragg, but we've had hundreds of them over many estimates hearing, so I don't think that's particularly surprising. Uh yes, the work was done. Senator Bragg.
And so what do you say to the small businesses that have to absorb the cost?
Well, we have responded um extending out the time frame for the implementation of this change, and that work is, you know, further work and consultation is happening.
But the surcharges have been banned. So the small businesses.
That wasn't a decision of government uh Senator Bragg.
Did the Prime Minister announced this back in 2024?
Well, the uh payments board made the decision. Um we certainly have supported the fact that we don't believe we believe there should be full transparency about the costs that are being charged for the price of items, and in relation to debit cards in particular, where it's your money and you're being charged a surcharge on essentially using your cash to buy something. Um but uh we have heard the response from uh small business. There was an extension provided on um listening to the feedback we got um that was extended further based on the fact that people didn't think that was long enough. Uh and we will work through some of those issues uh over that time, as we said we would, and as I indicated in that excerpt.
But I don't think you can credibly say that this was an arms-length judgment when the Prime Minister and the member for Ben Long were talking about this back in 2024 as a policy that you wanted to pursue. So you've done the consultation over the last two and a half years, and now the small small businesses. Member Ben Long. Yeah, so you've done this work. You've done this work over the last couple of years that you said you'd do uh but you've left small business to carry the CAN in terms of the surcharging ban. You may have made some changes with the ATO temporarily, but the small businesses have to subscribe the cost, don't they?
And and if I recall, um, you know, the focus in 2024 was on debit cards. Um I imagine that is the conversation that we are having at that time that from the excerpt that you call you read out. Subsequently there has been further work done by the RBA, and they appeared just before this session, so I presume you you've been through this with them as well. Uh and they spent a number of years looking at these issues, Senator Bragg. But ultimately, the decision on credit cards was one of the reserve bank in the implementing of that decision. Uh we in consultation with the ATO took a decision that there should be a period of time for implementation because to allow for businesses to adjust to implement that. We've heard that that was not long enough and we've extended that.
Okay. Well, I'm I think it's it's a pretty tough message for small business.
Um I I would also say just when you say it's a tough message for small business. I accept that you know, based on the figures I I've seen that it's I think from what I saw it was 15% of small businesses. 16% of small businesses who uh have surcharging on credit cards. Many others don't you the vast majority either don't use it or don't have surcharges on those transactions. So when you know, let's let's kind of stick with what we know here and accepting that that for those businesses, this the feedback was that this change is coming too fast and will have an impact on them, the government has responded to that.
So what's it what's going to be the total cost to taxpayers?
As a result of these changes, uh in relation to uh the ATO, there are um, you know, based on the advice we have, and they appear later today, and it might be better to have them at the table to answer some of those about the the costs involved.
Okay. Um I just wanted to ask you about the so and what about the total cost? Was there a total cost to businesses as a result of the changes you made to surcharging bans across the board?
So Senator, like if you think about the um the way the RBA thought about the reforms that it did and the numbers that put out there, um, you know, in the in the way they thought about it, they they've banned surcharges. But some businesses were passing on to, you know, the some businesses were using to pass on the price to customers. And in the way they thought about it, those businesses will ultimately build that into their menu or list prices and pass it on to customers. But the real gains would come from the fact that by reducing interchange fees, by giving merchants incentives to choose lower cost plans, and by improving and kind of related to that by improving disclosure of fees and transparency about the reduction interchange fees, the total cost of the system would come down. That would benefit ultimately consumers. It would also mean one effect of those changes would also mean that the price differential between the fee paid by a small business relative to a big business would be compressed.
So what is the total cost?
And since I've been in this group, which is over 10 years ago, this has been one of the long-standing small business issues with the payment system that favours the large merchants over.
So what's the total cost to government across all agencies?
So the the figures I was talking about were kind of whole of economy and you know the number the RBA put out with a $910 million reduction in costs, throwing through the interchange fee reduction itself.
You don't have a cost of taxpayers across the agencies.
So that costs the taxpayers is the is in some ways a different issue from that. But I think you're getting really into the ATO issues that I said.
The ATO is the one where there's the most substantial impact. Senator Bragg, you can't just pepper people with questions and then look disinterested when people try and you just go, oh yeah, whatever, and look over the process. You didn't know the answer. So last night Services Australia answered this question about the impact on them. It varies across government. Some agencies didn't charge, others did.
Yep.
Where they did, that has the biggest impact, the biggest impact is in the ATO.
So let's just stay with that thought. Let's stay with that thought, Minister. Because ATO agreed with your analysis. Ms. McKay mentioned home affairs as part of the preliminary group. Was DFAT part of that preliminary group? And would you expect DFAT to have high impost?
I just I don't know whether it's relevant like the Services Australia. We know services are still. I know, but it's very difficult for I mean we can answer who was at meetings, but I don't think it's fair to ask Market Group to uh answer questions about the impact on DFAT,
the impact on services. Someone would have had to have made a decision or a judgment call about the remote. Well that's fine.
If it's about who attended preliminary discussions, I think that's fine. It's whether it's it's whether or not the the it goes further beyond that, in which case it becomes a matter for that relevant.
So let's just deal with this one step at a time. Who was at the preliminary discussion? And actually, on what basis were people determined or invited. So what was the criteria?
Senator I think we've got sidetracked on the preliminary discussion, which is well before. Well before the IBA made its decision. So the IBA made its decision, as Ms. McKay said, the assistant treasurer communicated through portfolio ministers, you know, uh, to all the agencies in the Commonwealth so that they understood this decision had been made to convey the expectation that they would comply, that they would not be surcharging, and to get them to start thinking about what they would do. We subsequently, through, as again Ms. McKay mentioned, reached out through the chief financial officers of portfolios to understand the picture across Commonwealth agencies. So at that time, and I don't know if you want to do the numbers, um, or just keep going, I'll keep going. So there were 195 agencies uh that we touched base with. Um sixty-eight of them weren't accepting payments. 128 of them were accepting payments. Of those, 16 didn't accept card payments at all. So there was no issue for them. Ninety-seven of them weren't surcharging, and that left 15 agencies who were surcharging. Uh now, as uh the minister has said the ATO, you know, if you kind of look at the total revenues involved, and I don't think we've got the exact numbers here for ATO was a very large part of that, and that's why there's a lot of focus on the ATO.
Um I'm I'm treating this as one block, and you are now at 11 minutes between one block question. One more, and then I'm going to rotate to Senator Sharma.