Joe Ayoub, Dr Jonathon Deans
As discussed in the Targeting the black economy article in Budget
Review 2018–19, the final
report of the Black Economy Taskforce (‘the Taskforce’) made 80
recommendations to the Government.[1] Recommendation 3.1 of the
final report was the adoption of a limit on cash payments for goods and
services, which the Government accepted in its response, released on 8 May 2018.[2]
The recommendation has been included in the Budget as the Black
Economy Package—introduction of an economy-wide cash payment limit measure.[3]
Under this measure, there will be a limit of $10,000 for cash payments made to
businesses for goods and services (whether by individuals or other businesses).
The measure will not apply to individual-to-individual transactions, which is
consistent with the Taskforce’s recommendation. The Government’s response noted
that the measure was aimed at reducing money laundering and tax evasion; it
also noted that the Government would consult on implementation of the limit.[4]
Prevalence of cash use
Research published
by the Reserve Bank of Australia (RBA) in July 2017 showed that cash accounted
for 18 per cent of total merchant transactions (by value), falling to
11 per cent for payments of $501 or more.[5]
The RBA research did not state what proportion of transactions of $10,000 or
more are made in cash. Cash was disproportionately used by those in older age
groups, accounting for 51 per cent of payments (by number) for those
aged over 65 years, compared with 37 per cent for all age groups. It
was also disproportionately used by those in the lowest income quartile,
accounting for 44 per cent of payments (by number) compared with 37 per cent
for all quartiles. Other evidence of the extent of the cash economy can be
found in the Parliamentary Library brief on measures arising from the report of
the Black Economy Taskforce: Targeting the black economy.
Cash is used in the black economy because, unlike electronic
transactions, it does not leave an obvious audit trail.[6]
Non-compliance with taxation obligations enabled by the use of cash also
provides businesses with an unfair competitive advantage by being able to offer
to goods and services at a discount.[7]
Risks of cash use
Placing a dollar-value limit on cash payments for goods and
services not only limits the opportunities to under-report income, charge lower
prices and underpay GST, but also signals to the community that using cash for tax
avoidance is not acceptable. It was noted in the Taskforce’s final report that
implementation of a limit was broadly supported by stakeholders.[8]
The Taskforce’s final report noted that implementation issues
will need to be addressed, including, for example, determining what constituted
a ‘payment’, developing enforcement strategies such as incentivising the
reporting of banned transactions and ensuring payments are not artificially
structured to avoid the $10,000 threshold.[9]
A media
report quoted the Minister for Revenue and Financial Services, Kelly
O’Dwyer, as stating: ‘We’ve accepted $10,000 but we are interested in
consultation around the figure as well’.[10] The Taskforce’s final report
noted that several countries in Europe have equivalent limits, including
France, Italy, and Spain, and that the European Commission is exploring whether
to adopt a limit across the European Union.[11] A 2017 study
by researchers at Harvard University and the Royal United Services Institute identified
Jamaica, Mexico, Uruguay, and India as also having limits on cash transactions.[12]
That study found that limits ‘represent a practical and relatively low-risk
policy tool to tackle’ money laundering and tax evasion, with ‘very limited
downsides ... in terms of the impact on legitimate economic activity’.[13]
A separate media
report identified industries which may be affected as including real
estate, vehicle sales, and horticultural farming.
[1]. Black
Economy Taskforce, Black
Economy Taskforce: final report, Commonwealth of Australia, October 2017.
[2].
Australian Government, Government response
to the Black Economy Taskforce final report, 8 May 2018.
[3].
Australian Government, Budget measures:
budget paper no. 2: 2018–19, 2018, p. 23.
[4].
This measure is distinct from and addresses broader purposes than
existing requirements for ‘reporting entities’ (those that provide certain
financial, gambling, bullion and other prescribed services) to report cash
transactions of $10,000 or more to Australia’s anti-money laundering and
counter-terrorism financing regulator, the Australian Transaction Reports and
Analysis Centre (AUSTRAC) (see AUSTRAC, ‘Threshold
transaction reports (TTRs)’, AUSTRAC website).
[5].
Reserve Bank of Australia, How Australians pay: evidence from the
2016 Consumer Payments Survey, Supplementary
Statistical Tables.
[6].
Black
Economy Taskforce: final report, op. cit., p. 49.
[7].
Ibid., p. 53.
[8]. Ibid.,
p 55.
[9].
Ibid., pp. 56-57.
[10].
J Mather, ‘Government
binned cash amnesty idea’, Australian Financial Review,
11 May 2018, p. 8.
[11].
Black
Economy Taskforce: final report, op. cit., p. 55.
[12] P
Sands, H Campbell, T Keatinge, and B Weisman, ‘Limiting
the use of cash for big purchases: assessing the case for uniform cash
thresholds’, Occasional Paper, Royal
United Services Institute and Mossavar-Rahmani Center for Business and
Government, September 2017, pp. 19–21.
[13].
Ibid., p. 35.
All online articles accessed May 2018
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