The cash payments reform was originally announced in the 2018/19 Federal Budget, and is due to commence from 1 January 2020. This reform is not yet law – it is currently before parliament – but it is extremely likely that it will come into effect.
In this reform, the Government intends to restrict the value of cash payments a business makes or accepts to amounts under $10,000. Any payment over this amount must be made electronically or by cheque.
The concern with large cash payments is that cash is anonymous and untraceable. This makes it extremely feasible for businesses to underreport income, to offer consumers discounts that reflect avoided tax obligations, and facilitates under the counter deals.
An important point to note is that this cash payment limit will apply to the total price of a single supply of goods or services. This means that the cash payments cannot be broken up into smaller amounts to be paid over time. For example, if a payment of $12,000 is due, the cash payment limit cannot be circumvented by paying $3,000 in cash over four weeks – only $10,000 can be paid in cash, with the remaining $2,000 needing to be paid electronically or by cheque.
For AUSTRAC reporting entities, who are at present required to report physical cash transactions of $10,000 or more, this cash payments reform will alter the reporting requirements. If this reform becomes law, from 1 January 2021 certain AUSTRAC reporting entities will no longer be required to report cash transactions over $10,000 – as they will no longer be permitted to make or accept them.
At this stage, this reform is not yet law – however, it is advantageous to be aware of it as it is highly likely that it will be written into legislation in the near future. At such time, ignoring this cash payment limit will become a criminal offence with penalties of up to 2 years in prison and/or a fine up to 120 penalty units ($25,200) for individuals, or 300 penalty units ($63,000) for entities.
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