Assistant Treasurer Daniel Mulino has conceded the government knew the Australian Taxation Office (ATO) was considering banning credit card payments in July, months before the decision was made public.

The ATO's decision in late September to stop accepting credit card payments from December 1 sparked backlash from the business community, which eventually forced an intervention from the prime minister and the treasurer to underwrite the costs and allow credit cards to be accepted by the tax office until mid-2027.

Mr Mulino today said he and Treasurer Jim Chalmers were first made aware of the ATO's intentions months ago.

"In July, the government became aware that the ATO was looking at options and that at that point their preference was to not accept credit cards," Mr Mulino told ABC's Insiders.

"The indication we gave to the ATO was that they should continue to engage with the credit card companies, and that there should be a transition period."

The admission comes after the Australian Financial Review yesterday revealed the ATO had privately informed the government about its credit card ban and presented the government with options.

The ATO's decision followed changes from the Reserve Bank of Australia to scrap card surcharges from October 1, which the bank has said was "in the public interest" and was costing consumers about $1.6 billion a year.

Mr Mulino was asked why the government did not push for the ATO to continue accepting credit card payments from small businesses back in July.

"So, accepting credit card payments going on indefinitely, would have very serious fiscal ramifications for the budget, and that's why we always said that there should be a transition period," he said.

He said the government intervened "very quickly" after the negative fallout and insisted the government was listening. 

"We stepped in very quickly once the feedback came to us," he said. 

Small businesses were informed of the ATO's decision on September 30, a day before it was made public, and given a two-month grace period.

"But the transition period, as it turned out, from stakeholder feedback, wasn't enough. And so that's where the government stepped in," Mr Mulino said.

He was asked if he had any regrets about not stepping in earlier. 

"We've changed our position. So I've listened to stakeholder feedback, as has the PM and the treasurer," he said. 

"So, obviously we've changed tack and we've listened to feedback. And that's a sign of a government that is putting in place important big reforms."

Mr Mulino denied the government had a "hands-off approach", saying they "didn't get into all of the details" but insisted that the ATO should continue to negotiate with credit card companies. 

Earlier this month, Mr Chalmers said he was aware the ATO was "grappling" with the decision before it finalised the decision in late September, but he was not aware of the specific timeline.

Mr Mulino said he engaged with government agencies shortly after the RBA's announcement in March saying they were expected to comply with the removal of surcharges.

Australian Chamber of Commerce and Industry (ACCI) chief executive Andrew McKellar said it was concerning these discussions were happening in July when businesses were only informed the day before it became public. 

"Business wasn't made aware until just hours before the surcharge ban took effect in October," he said. 

"This looks like a completely deficient policymaking process that took small business for granted. It cannot be repeated."

The ATO initially defended its decision, saying it was not tenable for the agency to absorb the $200 million cost and that it would result in less revenue being collected and therefore less funding for government services.

Taxation commissioner Rob Heferen said the ATO "would have preferred to continue accepting credit cards" but that credit card companies did not offer a low enough rate.

Issue hints at leadership tensions

The debacle, and its timeline, has also exposed some tension between the treasurer and prime minister. 

Mr Albanese said he intervened after receiving a text from ACCI's Mr McKellar the day before. 

"My door is always open. Andrew did text me last Thursday morning, and by Friday morning we had an announcement," he said.

Mr Chalmers denied he was "rolled" and said he and Mr Albanese discussed the issue on the Wednesday prior.

Industry Minister Tim Ayres denied there were underlying frustrations between the pair, and told News24 that Mr Albanese was "a remarkably collegial prime minister". 

"This is a cabinet-style government that's working very well, it's very stable," he said.

"It's a real contrast to not just what's happening around the world, but a real contrast to what's happening on the other side of politics, which is a total mess."

Mr Ayres was asked if the government might permanently waive the ATO's credit card decision. 

"I don't think that there's any prospect of this issue being managed that way. We've made a big decision to defer this question to allow credit card payments to continue being used," he said. 

"There's a significant budget cost to that. It's the right call to make in these circumstances."

Mr McKellar said ACCI wanted a "permanent outcome" and wanted to ensure small business retained access to the "critical payment option".

"We will engage constructively with government to push for that," he said.