One of the most interesting approaches to tackling the black economy in the recent 2018-19 Federal Budget was the announcement of a $10,000 cash payment limit to businesses.
Unrecorded and untaxed transactions in the community are estimated at up to three percent of GDP. That’s around $50 billion.
We have all seen examples of the black economy in action, in the form of cash payments and money not ringing through a retailer’s till.
This initiative targets high-value transactions that are generally used to avoid tax obligations or for laundering the proceeds of a crime.
But let’s clear up any misconceptions about this so that you understand exactly what the new regulation would mean – and whether it will affect you.
How will the $10,000 cash payment limit work?
The proposed Australian $10,000 cash payment limit targets the larger cash payments people make. These are typically made for cars, yachts (and other luxury goods), agricultural crops, houses, building renovations and commodities.
This limit on cash transactions removes the ability of any individual or business to make a single cash transaction of $10,000 or more. It would apply from 1st July 2019.
The ruling would apply to all payments made to businesses with an ABN for goods or services. However, the impending restrictions would not apply to private sales where the seller does not have an ABN, or to cash payments to financial institutions.
So how do you pay $10,000 or more to other businesses?
Transactions at, or in excess of, the $10,000 threshold would need to be made electronically or by cheque.
Splitting the payment into smaller amounts, either as cash payments or a combination of cash and electronic payments would not be allowed under the rule.
There would also be restrictions to prevent payment structuring to get around the limit.
Australia following European anti-money laundering laws
At present, only financial services, banks and gambling industries in Australia have obligations for cash transactions of $10,000 or more.
Under the Anti-Money Laundering and Counter-Terrorism Financing rules, transactions of $10,000 or more must be reported by such businesses to the Australian Transaction Reports and Analysis Centre (AUSTRAC) within 10 working days.
Australia will not be the first country to introduce a cash payment limit to all businesses; France, Spain and Italy all impose limits at varying levels and generally for much smaller amounts than $10,000.
For example, France imposes a EUR 1,000 limit for goods and EUR 450 for certain services. There are some exemptions for non-residents, salaries paid in cash, and for those who do not have access to any other form of payment.
The proposed $10,000 cash payment limit in Australia is currently in consultation phase and is not yet law. We will keep you updated on progress.
Meanwhile, if you’d like to discuss this or any other business matter, please contact us on (07) 3490 9988 or (07) 5428 9555.