Labor knew in July, months earlier than previously admitted, that ATO planned to ban credit card payments

The federal assistant treasurer has conceded he and Jim Chalmers knew the Australian Taxation Office was considering banning credit card payments in July, more than two months earlier than the government has previously admitted.

Labor has intervened by funding the ATO to delay the credit card ban for tax bills until July 2027 after widespread backlash from small businesses.

Daniel Mulino told ABC TV’s Insiders program he knew the tax office was considering three options after the Reserve Bank announced in March it would ban merchant fees on credit card transactions from 1 October.

“In July, what we did was to insist that there be a transition period and also we took action with the ATO to arrange that that was possible,” the assistant treasurer said on Sunday.

“That two–month transition period that the ATO originally settled on was the busiest period of tax submissions. Now, that was their call, their design. We worked with them to make sure that they were able to fund that.”

Chalmers, the treasurer, told parliament last week he had been made aware of the decision in late September – about a week before it was made public.

Mulino said on Sunday the ATO’s preference had been to ban credit card payments. He and Chalmers then told the ATO to continue to engage with credit card companies to negotiate lower fees.

“Accepting credit card payments going on indefinitely would have very serious fiscal ramifications for the budget,” the assistant treasurer said.

“If they [ATO] had been able to achieve a much lower fee from credit card companies, they might have been able to continue to accepting them, but they didn’t get to the point that that was on offer from the credit card companies, so our preference at that time in July was continue those discussions, and those discussions have led to an improved offer, is my understanding, and those discussions in fact continue.”

Chalmers has faced pressure from the opposition and within Labor’s own ranks with some privately admitting the government bungled the credit card ban.

The prime minister, Anthony Albanese, was accused of rolling Chalmers after he implied he had personally intervened to delay the ATO’s ban, after a direct appeal from small businesses.

The pair denied any rift with Albanese stating he was “proud” of the treasurer’s work.

The chief executive of the Australian Council of Commerce and Industry (ACCI), Andrew McKellar, said the admission the government knew about the tax office’s preference for a ban in July was concerning.

“This looks like a completely deficient policymaking process that took small business for granted. It cannot be repeated,” McKellar said on Sunday.

The government has separately been under pressure over its proposal for a minimum 30% tax on discretionary trusts.

Mulino could not rule out that some small businesses using trusts could pay tax above the maximum rate of 45%. Mulino was asked multiple times on Sunday whether some businesses could get hit with a tax rate above 60%.

“What we’ve done throughout this process is to provide a transition period,” he told the ABC.

“There are lengthy transition periods to allow different structures to adjust. We’ve also provided a range of really important carve–outs, so fixed trusts, charitable trusts and so on. I don’t want to get into particular tax arrangements for particular companies.”