$10,000 cash limit, Coronavirus and tax
5 March, 2020 | Steve Burnham
$10,000 cash limit, Coronavirus and tax
Hello listeners, thank you for joining us. This is episode 209 of the Tax Wrap podcast. I’m your host, Steve Burnham and in this episode I thought we’d talk a little bit about something that’s just been passed by the Senate. It’s the cash payment limit of $10,000. This has been around for a little while, since late last year. I think that we’ve talked about it on the Tax Wrap podcast briefly before, but the development this time is that the Senate committee has recommended passage of the bill, so that’s a new development, and I thought it’s worth revisiting this bill, called the Currency (Restrictions on the Use of Cash) Bill 2019.
The Senate committee is recommending that the bill be passed. However, they do also recommend to defer the start date, which was going to be 1st of January this year, so that’s come and gone, and other refinements. The bill proposes to make it a criminal offense for entities to make or accept cash payments of $10,000 or more.
Well, the committee recommended the bill be passed subject to changing the start date, but it also had some other points to make about what should happen with the bill. Basically, the committee recommended that the government review the penalty provisions in the bill and introduce offenses for entities that make or accept cash payments of $10,000 or more on a regular basis actually.
Now the main purpose of this is to prevent entities from participating in the black economy, of course, by making large cash payments. But the Senate committee recommended the government review whether the bill is the most effective response to the problem of the black economy. The distinction, as I just mentioned, between one-off or repeated offenses in the penalty provisions, as the Senate committee thinks the latter, repeated offenses, are more likely to be attributed to money laundering and tax evasion. The committee also asks that the government respond to concerns raised on the availability of electronic banking services. You know, ATM and internet banking in remote and regional Australia, especially during natural disasters — and that makes a lot of sense.
It also recommended that an assessment be done on the impact of the bill on migrant communities, especially in relation to funerals. Now, I wondered about that. In relation to funerals, it’s a funny thing. Apparently in the submissions made about the bill, the legislation, the Australian Funeral Directors Association had called for an exemption for that industry, noting that many elderly Australians and migrant communities may have avoided banks, putting the money aside to save for a significant event like death. I don’t know whether they’re putting it under the mattress, but… And apparently the Dentists’ Association also expressed similar concerns. So that’s something to look at.
Getting back to what the Senate committee recommended that changes be made. Apart from extending the time when it starts, that the personal and private transactions payments exemption be provided for directly in the bill rather than be referred to in the… it’s apparently not in the body of the bill so I don’t know. I’m not sure why that would be important but if maybe someone can tell me? And also that the government come with a timely communication strategy to address concerns regarding the unsubstantiated claims regarding the bill. So they just want people… the thing to be, not marketed, but conveyed appropriately.
The Treasury actually had come up with a little list of myths and facts, because there was a lot of contentious allegations circulated during the passage of the legislation through both houses of parliament. Just briefly, I just wanted to go over the myths and facts just in case clients raise these concerns. Myth one, that cash cannot be used for everyday transactions, but the fact is that cash can be used to pay for a transaction up to the limit. That family members cannot give cash gifts is another myth. The fact being that the cash limit does not affect cash gifts to family members.
Another myth was that private individuals cannot buy or sell secondhand goods using cash. No, says Treasury. The cash limit does not affect sale of secondhand goods between private individuals. Also a myth that people are required to store money in a bank. And the fact, says Treasury, is you’ll still be able to store $10,000 or more cash outside of a bank. So buy a bigger mattress. Now, the myth people are no longer able to deposit or withdraw cash from their bank account. No, says Treasury, you can still deposit and withdraw up to the limit of $10,000. Another myth is the government can amend the bill for cash payment limits without scrutiny by the Senate, and that’s not the case they say.
Now you might wonder why $10,000? The thought is, and I discussed this with our friend Bill Mavropoulos from VT Advisory when he was in here once, that why $10,000 and Bill said, look, he thinks that what they’re trying to do is align it with AUSTRAC’s ability in terms of cross-border payments, coming in and out and when it’s above $10,000, and a lot of accountants will be aware of this. It’s automatically reported to AUSTRAC if it’s cross-border. So to some extent I think they’re aligning it with those cross-border measures and I guess also this would shift a lot of the onus onto the banks as well. The bank that is allowing you to withdraw more than $10,000 is going to have to answer some questions and I suppose banks will actually be toeing the line, especially in these days after the Hayne report. So no more ALDI bags full of cash.
The rules of the cash limit broadly, are that payments will … personal private transactions, other than transactions involving real property are subject to the limit. Payments must be reported by an entity and anti money laundering and counter terrorism legislation provided broadly. The entity with a reporting obligation complies was reasonably expected to comply with their obligations under that legislation. Permits made or accepted by a public official in the course of their duties … necessary for the payment to be made in cash for the performance of those duties and payments made or accepted by Australian government agencies where the payment is foreign currency produced for a foreign government. That is also not in the… you’re not covered by these rules.
Also not covered are payments that only equal or exceed the cash payment limit because the payment is part of a transaction involving collecting, holding or delivering cash, and this is undertaking the course of an enterprise of collecting or delivering cash. So that is providing cash-in-transit services. Also payments that only exceed the cash payment limit because payment is or includes an amount in digital currency, and payments that occur in exceptional circumstances where no alternative method could reasonably be used — they’re all very sensible. It’s interesting though that does have to be approved to be passed by the Senate with a few changes, and they all seem to be sensible suggestions as well. The Treasurer Josh Frydenberg has given the Senate committee an undertaking that the law will not be applied retrospectively, which is good.
Otherwise, well it will apply to payments made to businesses with an ABN for goods and services. And well that will affect major purchases like cars or building renovations. The government said the measure will not apply to individual-to-individual transactions, such as private sales with a seller does not have an ABN or cash payments to financial institutions.
The Senate inquiry noted concerns raised by the Australian Small Business and Family Enterprise Ombudsman and others regarding the availability of electronic banking services. As I mentioned, in remote areas. And Senate committee recommends that these concerns be addressed before the law passes. So it’s still a bit of an unknown about when this will come in, but the government hasn’t taken to look at these concerns. Concerns were also raised because of inflation. I mean the $10,000 limit would encroach on Australians dropping over time so that it’s been portrayed that within say 10 years, that could be $2,000 worth lower, but time will tell I guess.
I was interested in this whole cash thing. Of course the motivation is to fight the cash economy. I have observed myself that cash is becoming less of a thing in society. It comes at a time and apparently when cash… the use of cash by ordinary taxpayers is on the decline. Now, I looked at a Reserve Bank of Australia report, which was from about four years ago, which found that only around 37% of Australians make payments in cash. Which was half the RBA’s similar survey done four years before that, where we were making 70% of cash payments. Or payments were made in cash.
It’s a trend that seems to be continuing, and research undertaken in September 2019 by the comparison site finder.com.au that found that 23% of Australians don’t carry any cash at all. And another 21% only carry between one and $10. So that’s interesting. The research found that the average amount in someone’s wallet or purse was $59.40. But this varied according to someone’s age and gender. It seemed that men carried more than women. Men with an average of $74 and women an average of $44. By age, the research show that people under 24 had an average of $37 in their pocket. Those aged between 34 and 38, $68. Between 39 and 58, $56. And anyone older had an average of $70 in their pocket. So it’s all interesting.
So the restrictions on cash law recommend to be passed, but the Senate has a few concerns. Then the government has said that it will look at those concerns. But it’s something to keep in mind that might be coming around the corner, that you perhaps can warn your clients all about that.
I wanted to wind up by talking about, as everyone else’s talking about, the Coronavirus and tax. I would have thought the two had nothing to do with each other but apparently they might. This was from a communication to its members from the Corporate Tax Association, which is a great body, has a very interesting weekly newsletter that goes out. And the Corporate Tax Association raises the point that some of its members have raised with it. Now that the prime minister has formerly activated the emergency response plan for the Coronavirus, and with the ASX wiping out a lot of gains in different reports each day. Certainly at a macro level, the Corporate Tax Association posits that tax revenues will no doubt be affected and budgetary pressure will mount. But there are also some practical micro tax effects that practitioners may want to keep an eye on.
It depends on your client base. But as one taxpayer noted that travel bans imposed have meant the directors of some of their foreign subsidiaries can’t fly out of the country to attend board meetings and there’s a risk this may flip tax return residency to Australia, with meetings via video or teleconference. Now others have mentioned that they have senior folks overseas who are still working remotely. And that there may be a foreign permanent establishment risk. Apparently the idea is aware of that the imposition of travel bans can affect the ability for taxpayers to respond to information requests particularly as many companies are banning staff from returning to work. You may have been or in contact with people who have been traveling to some of the regions affected by the Coronavirus.
It might also affect the ability to lodge documents or returns, if lodgment cannot be actioned remotely. Now the Corporate Tax Association has been in touch with the ATO in relation to these sort of matters. And the ATO seems keen to help and wants to know about other cases. So the idea was asked for examples of similar types of issues where travel bans etcetera may affect reporting of taxs or lodging documents, etcetera. So are any listeners out there who have these issues? Please apparently if you contact the ATO and let them know what the problem is. They may try to do something about it. So please, if you become aware of any issues that… because of the Coronavirus travel bans, etcetera, please let the ATO know and let us know and we’ll report back to all of our members. Okay, that’s it for me. Thanks very much for listening. Please tune in again next time.
Tax Wrap 209: Tax Wrap looks at the legislation, approved by the Senate to be passed, that will limit cash payments to $10,000, plus possible tax issues that may arise due to the spread of the coronavirus.