AU$10,000 cap to raise money and stop black markets
This week the Australian government released draft legislation that would bring a limit on large cash transactions into effect. While the Australians first mooted the cap when the government released its budget last year, it seems that plans to implement it are now on their way.
The idea is to impose a potential AU$10,000 (US$6,983) cap on large cash payouts as part of a move to crack down on the black economy in Australia. It is thought this will raise over AU$5.3 (US$3.65) billion for the government.
Large fines for business owners
The exposure draft suggests fines higher than AU$25,000 (US$17,231) and up to two years in prison for business owners who accept large payments in cash after the end of 2020.
The Treasury has also announced plans to change the requirements for companies that report to the Australian Transaction Reports and Analysis Centre (AUSTRAC) by tightening rules under anti-money laundering regulation. There is already an existing AU$10,000 limit, but authorities are looking to expand that to gambling, digital currencies, and financial services.
Current figures from the government’s black economy taskforce estimate that illegal activity could be responsible for as much as 3% of GDP, costing the economy AU$50 (US$34.46) billion every year. It is hoped that the cash payment cap would make it harder for criminals to conceal transactions. In this way, it would make large-scale criminal operations, such as illicit tobacco trade, impossible to operate.
The limit will apply to goods and services, which the government also believes will help prevent people under-reporting earnings. This move, however, would also hit high rollers and those who deposit large sums of cash in casinos.
Critics say cap too high
Some transactions will be excluded from the cap. This means cash deposits and withdrawals above the amount specified by the cap will still be permitted. Foreign currency transfers and consumer-to-consumer transactions over $10,000 can also continue to be carried out with cash. However, property transactions will be subject to the cap.
Critics of the plan believe the cap amount is too high. KPMG Tax Partner Grant Wardell-Johnson said the limit would need to be nearer AU$2,000 (US$1,378) for it to really prevent criminal activity. He said that, while they accept the recommended AU$10,000,
there’s a prospect of lowering that in the future as people find this more acceptable.”
Others – such as the senior tax advisor at the Institute of Public Accountants, Tony Greco – have backed a lower gap, but added that it would need industry consultation ahead of a downward movement.
Further consultation is expected to take place before the cap is implemented.