It’s the hagglers’ motto: cheaper for cash. But bargaining for discounts on a new or used car, or other big purchases, could land both buyer and seller in jail, under a proposed law banning most cash transactions of $10,000 or more from January.
The legislation criminalises large payments in cash and will capture both lump sums and instalments that reach or exceed the threshold in total.
The government insists that individual private transactions will not be affected, only those involving a commercial seller or buyer.
But the way the legislation is drafted, it appears some private buyers and sellers could potentially find themselves at risk of a two-year jail term or $25,000 fine.
The Saturday Paper has confirmed that Treasury is also pushing ahead with consultations on a proposal to ban employers from paying wages in cash, requiring them to use traceable electronic transfers – as most already do – to lessen tax avoidance and enforce workplace laws.
Like the cash payment limit, that move was flagged in the government’s response last year to the 2017 report of its Black Economy Taskforce.
The bill limiting cash payments to $10,000 has had scant public attention. Some business groups support it but others are raising concerns about the broad drafting, the lack of a presumption of innocence, increased exposure to criminal prosecution on little evidence and other potential implications far beyond its declared intentions.
The government says the legislation is aimed at tackling tax evasion and other illegal activity, including money laundering. But it will restrict the use of large amounts of cash by ordinary businesses and consumers as well.
Some economists suggest it may be a pre-emptive move to address people’s tendency to hold cash and avoid banks during economic downturns, especially when interest rates drop below zero.
The government proposes exempting private transactions between individuals – for example, the sale of a private car through online marketplaces such as Gumtree – but only if each party has confirmed that the other isn’t using the sale item as part of an enterprise.
A spokesman for Assistant Treasurer Michael Sukkar said a transaction would be exempt if an asset is sold and bought in a private capacity, even if either individual is also “carrying on a business or other enterprise”. He did not say what would happen if a person was selling or buying an asset to be used regularly for both private and business purposes.
While transactions of $10,000 would constitute a criminal offence, those of $9999 – $1 less – would not.
While deposits in a bank would be exempt, gifts would not.
Paying more than $10,000 cash for any part of a transaction involving real property – land or buildings – would also be illegal.
Australians are using less and less cash in daily transactions but increasingly hoarding $50 and $100 notes. That is the case whether the money is acquired through declared or undeclared employment, or illegal activity such as drug production and trafficking.
Reserve Bank of Australia research suggests 70 per cent of Australians keep at least a small amount of spare cash, aside from what’s in their wallets.
The cash is used as a buffer against personal hard times or an economic downturn, or to keep some or all of their income out of the banking, tax and welfare systems. Sometimes it is lost or forgotten. Cash is still favoured by seniors, people on low incomes and some migrants, but overall electronic payment is more prevalent.
Domestic demand for high-denomination notes, along with overseas demand from currency investors and would-be tourists – and use by casinos or in criminal ventures – means $50 and $100 notes make up the largest proportion of banknotes officially in circulation. They account for 93 per cent of the value of all banknotes, despite being the least used day to day.
The Reserve Bank is upgrading the country’s banknotes, adding new features for security and to help the visually impaired. The new $20 note entered circulation on Wednesday. The $5, $10 and $50 notes were replaced over the past three years and the new $100 banknote is due next year.
But the government makes no secret of wanting people to shift to transactions that are easier to trace.
The proposed criminalisation of large cash payments will be retrospective in some cases. If any part of a $10,000-plus payment is made after the law takes effect – currently due to be January 1 next year – it will be an offence. A single instalment towards the overall cost of an item or service would render the total payment illegal, even if most of it was paid before the law existed.
Introducing the legislation last month, Michael Sukkar told parliament that large, anonymous and untraceable cash payments were letting businesses underreport their income and undercut others by offering cash discounts.
“This practice has a profound negative impact on businesses that do the right thing,” Sukkar said. “The vast majority of businesses that diligently pay their tax and meet their other obligations are not able to offer the same unfairly discounted price for their goods or services.”
But the proposed response could also ensnare innocent businesses and individuals. The legislation applies what is known as strict liability to relevant transactions, meaning prosecutors don’t have to prove the participants intended to commit an offence.
Sukkar’s spokesman said any whole or partial transaction conducted in cryptocurrencies would be exempt, although the legislation defines cash as being either physical or digital currency.
Exemptions are to be outlined in a separate written instrument signed by the treasurer.
Excluding cryptocurrency risks driving criminal activity further underground and making it even less traceable. But including it could put legitimate Australian users at a commercial disadvantage and would be extremely difficult to police.
Some organisations have begun raising concerns about the bill’s impact.
CPA Australia, representing certified practising accountants, is alarmed that people could be jailed for using legal tender.
The CPA submission to Treasury condemns the legislation as lacking the presumption of innocence, being poorly drafted and introducing vicarious liability into criminal law – making one person responsible for the actions of another.
“The presumption that only tax evaders, money launderers and criminals use cash … has resulted in a proposed bill and instrument that run counter to well-established criminal law principles and [has] the potential to affect many Australians,” the submission says.
“It extends criminal liability to innocent parties associated with a potential offender, such as partners in a partnership, and has application to Australian citizens and residents outside Australia. It significantly increases the power of government agencies to investigate and prosecute people for an action, without needing to demonstrate the commission of what would normally be considered a criminal act, nor the intent to commit such an act.”
CPA Australia says the bill should be scrapped or at least overhauled.
France, Italy and Spain have already adopted similar – although lower – payment limits. New Zealand’s Reserve Bank has also begun a public consultation on the future use of cash, identifying which sections of the community would be disadvantaged if it disappeared and how to address that.
The RBA reports that nearly 1.6 billion Australian banknotes are in circulation, worth $76 billion. Of those, only 25 per cent are used in transactions – the rest are hoarded or otherwise held.
The Currency (Restrictions on the Use of Cash) Bill 2019 was introduced into parliament on September 19, two days after the Coalition party room endorsed it.
But Coalition MPs did not universally support it, with Nationals Pat Conaghan, Barnaby Joyce and George Christensen, and Liberal Russell Broadbent, all speaking against it.
Conaghan, a former criminal lawyer, told The Saturday Paper the legislation was described to MPs as being aimed at outlaw motorcycle gangs and terrorist financing. He said it became clear it was actually about the black economy.
Conaghan believes the proposed law will do little to achieve what the government wants but will potentially harm law-abiding people. “You’re turning mum-and-dad Australians into criminals,” he said. “… The only people who will abide by the legislation are the honest people. The person it will hurt is the grandmother who decides to put a new kitchen in and pays $12,000 instead of $15,000 because she is paying in cash.”
He said he’d had “a huge response” from angry constituents.
“People object to this,” he said. “Last time I looked, cash is legal tender.” People were asking him: “Why is the government sticking their nose in when we’re doing nothing wrong? You’re telling us what cash we can spend.”
Conaghan questioned the political wisdom in forcing people to pay bank fees, especially at a time when the recent royal commission exposed questionable banking practices and when the official cash rate may fall further. “If it does go below zero, the average punter is paying the bank to look after their money,” he said.
Broadbent confirmed he was also concerned about the bill.
“I don’t know quite who they’re targeting,” he said this week. “Cash is legal tender and I wouldn’t have thought $10,000 is very much anymore… I don’t think it will make any difference to crooks.”
Broadbent said seeking a lower price in exchange for cash was “a legitimate way of negotiating” and he questioned whether the limit would reduce the black economy. “The GST was meant to remove the black economy, remember?”
The chief executive of the Council of Small Business Organisations Australia, Peter Strong, told The Saturday Paper he supported the government’s approach.
But Strong said someone confronted with a cash-or-nothing ultimatum from a customer should be able to accept the money and then report it without facing prosecution. He suggested a hotline and immunity, provided the payment was declared.
He said there also needed to be a change in the culture that encouraged using cash to sidestep official systems.
“Until we get that change in culture, then there will be honest individuals out there who will absolutely feel the pressure to take that cash to feed their families,” he said.
Strong is on the government’s Black Economy Advisory Board, which grew out of the taskforce whose 2017 report first recommended the restriction.
The legislation has now been sent to a senate committee for examination. Its report is not due until February 7 – more than a month after the new law is supposed to take effect. One Nation says it intends to oppose the bill. Labor is inclined to support it.
Centre Alliance senator Rex Patrick was among those who pushed for the senate inquiry. “We need to draw out all the unintended consequences,” he said, “and make sure these laws don’t affect genuine, law-abiding citizens.”
This article was first published in the print edition of The Saturday Paper on October 12, 2019 as "Cash checks".
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