Limiting cash payments: Why the Government doesn't want your business to accept $10,000 or more
If your business accepts cash payments then you need to be mindful of new restrictions that will limit the value to $10,000 – otherwise you may be breaking the law.
Many Australian businesses still accept cash as a form of payment, however from 1 January 2020, the Government intends to restrict the value of cash payments a business makes or accepts to amounts under $10,000. Ignoring the limit will become a criminal offence with penalties of up to 2 years in prison and/ or $25,200*.
Payments of $10,000 or more will need to be made electronically or by cheque.
We'll, easy enough you say, just break it up into smaller amounts! But, the law has already thought of that.
How will the limit apply?
The cash payment limit will apply to the total price of a single supply of goods or services, regardless of whether the price is split into a series of payments over time. If a customer is making cash payments over time, for example instalment payments on a car, the total cash component cannot equal or exceed $10,000 – payments above this amount will need to be made using alternative payment methods.
If a genuine mistake has been made, you will need to be able to prove that you, "reasonably believed that a payment did not include an amount of cash that was equal to or exceeded the cash payment limit."
Making a mistake does not stop the breach being an offence, it merely limits the fault element. Recklessness is not a genuine mistake and the ATO has a long history of how it handles reckless behaviour.
Targeting untraceable payments to limit underreporting and avoiding obligations
The cash limit initiative came out of the Black Economy Taskforce and targets untraceable payments. The concern with large cash payments is that cash can be anonymous and untraceable.
Making payments in cash makes it easier for businesses to underreport income and to offer consumers discounts for transactions that reflect avoided obligations, gaining a competitive advantage over businesses that either cannot or will not offer such discounts. In other words, under the counter deals.
Interaction with AUSTRAC reporting entities
It's not only the new cash payment limits coming into being; changes are also being made to AUSTRAC reporting.
Currently, financial services, trading in bullion, and gambling services generally need to report to AUSTRAC for transfers of physical or digital currency of $10,000 or more.
From 1 January 2021, certain AUSTRAC reporting entities will not be required to report physical cash transactions of $10,000 or more as they will be unable to make or accept them.
The cash payments reform was originally announced in the 2018-19 Federal Budget and were due to commence from 1 July 2019 but pushed back to 1 January 2020. The reforms are not yet law and are currently before Parliament.
Does this impact your business?
If your business accepts cash and this is likely to impact operations, contact us on 02 9957 4033 for guidance on how to adapt.
*120 penalty units for individuals. Entities face 300 penalty units per offence (currently $63,000).
This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.