New rules banning cash purchases of more than $10,000 are on track to become law after receiving the green light from an important Senate inquiry.
The Currency (Restrictions on the use of Cash) Bill 2019 will make it a criminal offence to pay cash for purchases of more than $10,000, with penalties of up to two years in prison and as much as $12,600 in fines.
The draft laws received support from a federal Senate inquiry earlier this year after passing through the House of Representatives in 2019.
The federal government has yet to announce when the new rules will become law but has indicated that it will consult with businesses in order to give people enough time to adjust.
Why ban cash purchases over $10,000?
The draft laws were recommended by the treasury’s black economy taskforce to stamp out tax avoidance, money laundering, and other black economy activities.
Industries where cash payments are common can often lead to vendors not declaring their income and avoiding tax.
This means they are effectively running their business at a lower cost than their rivals and creating uneven competition.
“Based on the evidence provided, the committee agrees that non-cash payment methods create clearer records; are usually more convenient for consumers and businesses; and increasingly involve lower costs, as they simplify record keeping and avoid the security, insurance, and other costs associated with handling and holding cash,” the Senate committee said.
What are the limitations of the new cash rules?
While the move is a step toward a more equitable economy, many have doubts about how effective the move will be.
Those who tend to rely more on cash payments such as the elderly and those in regional and remote areas who struggle to access electronic banking services have argued they will be left at a disadvantage.
The Senate committee said it was concerned that a disproportionate penalty could be applied to small or medium-sized businesses that don’t have sophisticated processes like larger businesses.
The committee was also told that some migrant communities may be adversely impacted, as some cultures may have a preference to pay in cash.
“This may be due to a lack of trust in institutions resulting from their past experiences in other countries,” the committee said.
How the cash limit rules may impact your business
Businesses of all sizes will be impacted when these draft rules become law, however the government has ruled out applying the laws retrospectively.
Businesses that receive cash payments of more than $10,000 should start adapting their processes to be ready when these rules are passed in the Senate and take effect.
If you regularly accept cash payments of more than $10,000 and have questions about how this may impact your business, please speak to one of our business advisors today.
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