From July 2019, the government will ban all cash payments of $10,000 or more in an effort to stop illicit or illegal transactions from taking place.
The measure, which was first announced in May, is the Turnbull administration’s innovative financial solution for cutting down on the Australian black market, which is thought to be worth as much as $50 billion.
The proposal hasn’t gone down well with everyone though, with real estate agents, brokers and other property industry experts – as well as farmers – particularly critical of the cash payment limit as it currently stands.
Will the new system work?
The logic behind the $10,000 cash limit is to curb money laundering and criminal activity. When questioned, Treasurer Scott Morrison of the Black Economy Standing Taskforce said:
“Cash provides an easy, anonymous and largely untraceable mechanism for conducting black economy activity,” the response said.
“Cash payments make it easier to under-report income and avoid tax obligations. This allows businesses transacting in cash to undercut competitors and gain a competitive advantage.”
However, some have said that the new policy will be too easy for real criminals to get around, while others are seeking reassurances that existing loopholes will be closed.
A senior real estate agent, talking off the record, revealed that ‘everyone knows it goes on’ when it comes to cash in hand payments, while another suggested that the proposed crackdown would be ineffectual unless monitoring using highly sophisticated technology was implemented.
Cash payments in the real estate industry
Sources in the real estate game have revealed that cash payments are often used as a means of reducing the offer price, so the buyer doesn’t have to pay as much tax on their purchase.
However, gone are the days when foreign property buyers used to rock up with briefcases full of cash:
“If someone comes to us with cash, they have to deposit it into our trust account at the bank, explaining to the bank the purpose of the money,” the founder of Black Diamondz, Monika Tu revealed.
“Very few agents, especially major ones, take cash anymore.”
The government has said that it’s in discussion over how to cut down on potential loopholes – such as the possibility of withdrawing smaller amounts of cash with a sum total of over $10,000.
Cash economy under threat
The cash payment limit is the latest in a series of measure the Australian Tax Office has taken to reduce the so-called ‘cash economy’, with retailers who only accepted cash being identified and data pertaining to motor vehicle sales over $10,000 being examined.
It’s clear that there’s still a long way to go, though, as cash still reigns supreme in some industries, not least farming, where ‘suitcases of cash’ are often smuggled into the country prior to the summer season to be used as deposits for fruit crops.
Whatever happens, it’s clear that the $10,000 payment limit marks a potentially huge shift away from cash in the Australian economy.