Move to limit cash payments from 1 January 2020 to amounts of up to $10,000

In a bill currently before Parliament, the Government is proposing that from 1 January 2020, a cash payments limit apply of up to $10,000 per purchase. This measure was first mentioned in the 2018-19 Federal Budget as a way to tackle the black economy, which has been estimated at being worth up to $50 billion a year.

Cash payments can be anonymous and untraceable. Some businesses have taken advantage of this by not reporting these transactions, which gives them an underhand benefit over competitors who are operating within the law and paying tax on their full income. By introducing a cash payments limit, the Government may be better positioned to identify where income is under-reported, thus being able to apply the relevant taxes and even out the playing field for competitors.

So how would a cash payments limit work?
For purchases up to the $10,000 limit, cash can still be paid or received. Where a purchase is for $10,000 or more, up to $10,000 could still be paid or received in cash, but the amount that exceeds this would need to be provided electronically or by cheque.

Can we accept or pay cash in instalments instead?
If the instalments are all in relation to the one purchase, the limit is still applicable. It’s not the timing of the payment that matters, it’s the method of payments, e.g. EFTPOS, credit or debit card, cash or cheque. So if you sold an item worth $14,000 and the buyer wanted to pay via 7 instalments of $2,000 each, that is fine, but you will have to monitor the payment methods and make sure that any the total of any cash received across all 7 instalments doesn’t exceed the limit. You won’t be able to just accept 7 separate lots of $2,000 in cash, because the total cash component would then be $14,000 – so over the limit. This could be hard to manage in some accounting systems unless further updates are released to specifically highlight where and what amount of cash has already been received.

What would happen if we ignore the limit?
The bill outlines that ignoring the cash payment limit would be a criminal offence, with penalties of up to 2 years in jail and/or fines – 120 penalty units (currently $25,200) for individuals and 300 penalty units (currently $63,000) for businesses.

What if we made a mistake?
You would 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”. However, that would merely limit the element of fault in the contravention, it wouldn’t remove the fact that there was a contravention. So penalties could still be applied.

When will the cash payments limit apply from?
If the bill is passed into legislation, it will apply from 1 January 2020. At the time of writing, it is not yet law. We will update our clients if and when it is passed into law.

In the meantime, it might be worth thinking about what changes you might need to make if it does become passed onto law.

If you have any questions about how this might affect you and your business, please contact us on 03 5339 3200 or contact us here.

Thanks for reading.

By Genna Kidd

The information contained on this website has been provided as general advice only.  The contents have been prepared without taking account of your personal objectives, financial situation or needs.  You should, before you make any decision regarding any information, strategies or products mentioned on this website, consult your own financial advisor to consider whether that is appropriate having regard to your own objectives, financial situation and needs.

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