As of January 1st, 2020, the Government intends to stop businesses making or accepting payments at or over $10,000. This will mean all payments exceeding the limit will need to be made electronically or by cheque. Ignoring this limit will become a criminal offence, you could potentially face penalties up to 2 years in prison and/or a $25,000 fine.
So, what’s stopping businesses from breaking the payment up into smaller amounts? The legislation is very specific there. The cash limit applies to the total price of a single supply of goods or services. Even if you split the price into a series of overtime payments, if the total is over $10,000 you will need to find alternate methods for payment.
As an example, if your customer buys a car and is making small cash payments over time, the total cash payments cannot exceed $10,000. Your customer will have to use online payments or cheques in order to complete the payment.
Why has this change happened?
The main intention behind this legislation is to target illegal payments. This initiative came from the Black Economy Taskforce who are trying to crack down on untraceable payments. There is a concern over large cash payments being anonymous and untraceable, and how they enable an illegal economy.
Cash payments can make it easier for businesses to underreport their income, and can allow them, to offer consumers discounts for transactions that reflect avoided obligations, that gives them a competitive advantage over a business that cannot offer equivalent discounts. Also known as under the counter deals.
What if I make a mistake?
If you genuinely make a mistake and accidentally exceed the $10,000 cash limit you will need to prove that it was an accident. The proof will need to show that you “Reasonably believed that a payment did not include an amount of cash that was equal to or exceeded the cash payment limit.” This will not stop the breach being an offence, however it will limit the fault element.
Interaction with AUSTRAC reporting entities
AUSTRAC reporting will also be changing with the introduction on the new cash limit. Currently, those trading in bullion, financial services, and gambling services, need to report to AUSTRAC any transfers of physical or digital currency of $10,000 or more.
However, from January 1st, 2021, certain AUSTRAC reporting will no longer be able to make or accept reports on physical cash over $10,000, so those who normally needed to report will not be required to.
The reforms are not yet law and are currently before Parliament to be voted on soon. The changes were originally supposed to commence from 1st of July 2019 after their 2018-2019 Federal budget announcement, however, were pushed back.
If you are unsure on how these reforms will affect your business talk to Link Advisors today.