A $1 billion plan to outsource Australia’s visa processing system has been canned by the Morrison government after already costing taxpayers tens of millions of dollars.

Acting immigration minister Alan Tudge on Friday afternoon announced the government will not go ahead with the controversial tender, with the Department of Home Affairs to instead undergo a wider overhaul of its services extending to citizenship applications, security clearances and customs.

The Department of Home Affairs has binned the visa outsourcing tender.

The decision comes after taxpayers have already forked out at least $87 million on the tender, according to latest figures released from the government. Both bidders have already been paid at least $1 million to participate in the co-design phase of the procurement.

The move comes after a decision on the politically sensitive tender process to choose the successful bidder was last year delayed amid political conflicts of interest within cabinet.