Cash Payments Limit Coming Soon
As a part of the crackdown on black economy, the Government is planning to introduce an economy-wide cash payment limit of $10,000. Any payments made to businesses for goods and services from 1 July 2019 would be captured, and if the transaction exceeds $10,000, payment will need to be made using an electronic system or by cheque.
This proposed measure has been introduced in response to the findings of the Black Economy Taskforce Final Report. The report noted there were significant risks to legitimate commercial behaviour resulting from using large undocumented cash payments to purchase cars, yachts, other luxury goods, agricultural crops, houses, building renovations, and commodities. According to Minister for Revenue and Financial Services:
“We…know that businesses that insist on cash payment may be doing so to avoid their tax, retain welfare payments, or avoid child support and other obligations, and may therefore receive an unfair competitive advantage over those businesses that do the right thing.”
However, consumers should note that the cash transaction limit will only be imposed for payments (for goods and services) to entities holding an Australia Business Number (ABN). The proposal will not apply to consumer to non-business transactions, such as those in second-hand markets such as Gumtree, or where the selling party does not have an ABN.
Further, the proposal will also not apply to financial institutions, so there will be no impediment on the abilities of individuals, businesses, or other entities to deposit large amounts of cash with their bank or to deposit cash in paying off loans with a financial institution. Although, any such deposits would be caught under the existing Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) reporting requirements to AUSTRAC.
Currently, the Government is planning to leverage the AML/CTF obligations to assist in the administration and enforcement of the cash limit. A combination of threshold transaction reporting and reporting of suspicious matters will be deployed, with the Black Economy Hotline facilitating community referrals on suspicious behaviour. Penalties will apply to both parties to the transaction should the $10,000 limit be breached, that is, the payer and the receiving business. According to the Government this will ensure that both business requesting cash payments and consumers pressuring businesses to take cash in exchange for a discount are captured.
If Australia implements this proposal, it will be in good company and join many other European countries that have introduced cash payments limit. The UK is currently consulting on the issue in a bid to crack down on those who use cash to evade tax and launder money. It seems the inevitable crackdown on cash and its links to illegal activities and avoidance of tax has begun.
Are you ready for the ban on cash?
If you would like to find out more about the proposed cash payments limit and how it will affect the way you do business, contact us today. Or if you would just like to start using electronic payments for your business, we can help.