Federal Government Releases Draft Bill For Economy-Wide Cash Payment Limit of $10,000

Thursday 8 August 2019 @ 12.05 p.m. | Legal Research | Trade & Commerce

On July 26, the Federal Government released a draft version of the Currency (Restrictions on the Use of Cash) Bill 2019 (Cth) (the “Draft Bill”) and accompanying draft Explanatory Material (the “Draft EM”) for public comment and consultation, with submissions closing on 12 August 2019.

Background to the Proposed Bill

As outlined in the Draft EM, the proposed legislation:

“… creates new offences that apply if an entity makes or accepts cash payments with a value that equals or exceeds the cash payment limit. However, the offence does not apply if the payment is made in the course of a transaction of a kind specified by the Treasurer by legislative instrument.”

It proposes to introduce offences for entities that make or accept cash payments of $10,000 or more, “ensuring that entities cannot make large payments in cash so as to avoid creating records of the payment and facilitating their participation in the black economy and undertaking related illicit activities”.

The Federal Government hopes to implement the economy-wide cash payment limit from 1 January 2020 and for certain Australian Transaction Reports and Analysis Centre (AUSTRAC) reporting entities from 1 January 2021.

In a Media Release, the Hon Michael Sukkar MP (Minister for Housing and Assistant Treasurer) commented:

"... the black economy undermines community trust in the tax system, gives some businesses an unfair competitive advantage, puts pressure on the margins of honest businesses and often includes the exploitation of vulnerable employees through the underpayment of wages and the loss of entitlements."

A Treasury document indicates the following would be classified as “exempt transactions”:

“All cash deposits and withdrawals from your bank account with an authorised deposit-taking institution (ADI), exchanging foreign currency and all consumer to consumer transactions such as selling a second-hand car but excluding real property transactions.”

The Black Economy Taskforce

Forbes reveals the legislation comes on the back of a recommendation from the Federal Government's Black Economy Taskforce (the “Taskforce”) on how to limit tax evasion and general criminal activity in Australia. The Government first announced their plans for the upcoming law change in their 2018-19 Budget Review.

The Taskforce defines the black economy as “people who operate entirely outside the tax and regulatory system or who are known to the authorities but do not correctly report their tax obligations.”

The Executive Summary indicates the “black economy is a significant, complex and growing economic and social problem. In our opinion, it could have increased in size by up to 50 per cent since 2012.” In part, the Executive Summary also noted (pages 1-2):

  • the black economy is more diverse, more complex and influenced by a wider range of factors than [we] first realised;
  • the black economy is an endemic cultural problem; and
  • exploitation of vulnerable employees is widespread and may be growing.

To assist in combating this problem, the Taskforce suggested consideration be given to some 16 recommendations. Some of the proposals are:

  • moving to a near cash free economy – a $10,000 economy-wide cash limit should be introduced;
  • taxable Payment Reporting System extension;
  • sharing economy - a reporting system for sharing or gig economy operators should be put in place;
  • payment of wages into bank accounts to increase transparency; and
  • better targeting phoenixing - tougher and better targeted promoted penalties, better early detection and asset clawbacks.

Potential Penalties

Under the draft materials released, from 1 January 2020 it would become a criminal offence to make or accept a payment from businesses that includes $10,000 or more of cash, as well as it being an offence to make or accept a cash donation equal to or in excess of $10,000. The maximum penalty would be up to two years imprisonment and/or 120 penalty units ($25,200).

Where to Next?

Following the close of public consultation, the Government will consider feedback and introduce the Bill to Parliament.

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