The $144 Million Cover-Up: NSW Government’s Secret Surcharge Exposed

The NSW Ombudsman is set to investigate whether the former Coalition government flouted legal advice by imposing a hefty surcharge on government transactions. This surcharge, which totalled an astounding $144 million over eight years, raises questions about the ethics and legality of past practices. This article dives deep into the intricate details of this unfolding story, exploring the implications for government accountability and consumer rights.

The Unfolding Saga of Unlawful Surcharge

The controversy centres around allegations that the former Coalition government ignored repeated legal advice against charging a so-called “unlawful” surcharge. This fee, applied to government transactions, has reportedly impacted millions of customers. NSW Minister for Finance Courtney Houssos has taken the bold step of referring the matter to the state’s Independent Commission Against Corruption, seeking an investigation into possible maladministration.

The saga began with a simple yet significant query—why were these surcharges imposed despite legal advice to the contrary? Minister Houssos disclosed that Service NSW customers had borne the brunt of these merchant fees despite clear advice from the Crown Solicitor on three occasions—two in 2016 and once as recently as December 2022—stating that such practices were unlawful. Merchant fees, typically a percentage of credit and debit card payments, are used to cover transaction fees levied by banks and payment providers.

The Financial Impact on Consumers

The repercussions of these surcharges are staggering. An estimated 92 million transactions were allegedly impacted, with $144 million worth of merchant fees collected since 2016. Minister Houssos emphasised that the average individual may have been affected to the tune of approximately £30 over the past eight years.

This situation raises a fundamental question about government responsibility. Minister Houssos highlighted a common law principle stating that the government cannot collect a merchant fee or service fee without specific statutory authority. The implications of this principle are immense, particularly when considering the sheer scale of the alleged infringement.

Who Knew What and When?

The timeline of awareness is critical in unraveling this complex web. Minister Houssos revealed that the current government learned of the issue in July 2024, following notification from the newly appointed Auditor General, Bola Oyetunji. This revelation prompted immediate action to rectify the situation.

In response to these allegations, Damien Tudehope, who served as NSW Finance Minister from April 2019 to March 2023, stated he could not recall receiving any advice regarding the legality of passing on merchant fees. However, he did not dismiss the possibility of such advice existing. Tudehope asserted that if he had received any such communication, he would have acted upon it promptly.

Steps Toward Resolution

To address this pressing issue, Minister for Customer Services Jihad Dib has established a specialist task force. The task force has already succeeded in eliminating merchant fees on at least 80% of applicable government services. Dib expressed confidence that all fees would be removed from government services within a matter of weeks.

The task force’s approach prioritises high-traffic services, including licence renewals, car registrations, boat licences, national park passes, and fishing permits—essentially covering most transactions conducted within Service NSW centres. These efforts aim to alleviate the financial burden on consumers and restore public trust.

Voices of Accountability and Reform

James Griffin, the Shadow Minister for Customer Service and Digital Government, voiced concerns about the impact of agency cuts on the ability to implement task force recommendations. Griffin emphasised the importance of refunding customers if fees were charged incorrectly.

Griffin’s statement underscores the broader issue of accountability within government agencies. All NSW government agencies were directed to impose merchant fees on a cost-recovery basis in May 2012 during the Barry O’Farrell government. Now, departments must report to NSW Treasury by the end of November to confirm the legality of charging these fees for their services.

This unfolding story raises questions about the transparency and responsibility of government practices. With allegations of serious maladministration looming, the investigation by the NSW Ombudsman and the Independent Commission Against Corruption holds significant implications for the future conduct of government transactions.