Views on the bill
This chapter summarises the views held by stakeholders on the provisions of the bill. The chapter is intended to provide an indicative, though not exhaustive, account of the issues examined during the committee's inquiry.
Following a call for submissions, the committee received 2,659 emails, letters, and documents from interested stakeholders. The committee notes that the Treasury also sought opinions on the bill's exposure draft and, during this consultation process, received 3,620 submissions.
The majority of these items raised a number of recurring themes and indirectly addressed the provisions of the bill. Given this, the committee resolved to receive and publish a sample of these items and accept the balance as correspondence to the committee.
Although expressed to stakeholders throughout the inquiry, the committee reiterates that various views and concerns represented across submissions and all other correspondence were duly considered during its deliberations, the preparation of this report, and its subsequent recommendations.
The committee recognises that the majority of submitters raised objections to the bill; however, the committee notes that a number of the arguments raised within these submissions were based on hypothetical scenarios, such as a negative domestic interest rate environment coupled with a cashless society, and future choices the Parliament may or may not make, such as reducing the cash payment limit below the proposed legislated amount of $10,000. The committee considered these objections to the extent that they related to the provisions of the bill. The committee acknowledges the bill has raised concerns with sections of the community; however, the committee rejects the conspiracy inherent in some of the contributions on the bill. In particular, the committee rejects the 'cash ban' nomenclature.
The committee notes that, contrary to a number of inquiry participants' claims, cash will remain legal tender within Australia if the bill is passed by the Parliament and the cash payment limit comes into effect. Hence, cash will remain a legal store of value and transaction payment method for all Australians to utilise.
The committee also notes that, contrary to evidence provided to it, the cash payment limit does not, in any way, reduce the capacity of individuals and businesses to withdraw money, in any denomination, from their bank accounts and hold it outside the financial system. Likewise, the bill does not affect the ability to deposit cash with a financial institution.
Comments in support of the bill
In its submission, the Department of the Treasury (the Treasury) noted that the Black Economy Taskforce (the taskforce) found growing frustration within the community about the unfairness of the black economy, and stated that this illegal activity not only harms competition, but also limits the resources available to the government to provide essential public services, such as education and health care.
The Treasury outlined that, as part of a broader suite of measures to reduce money laundering and tax evasion, a cash payment limit would, due to the offence provisions created, reduce the likelihood of firms accepting and making cash payments equal to or exceeding $10,000, hence improving audit trails and reducing anonymity.
Citing the beneficial impacts resulting from the introduction of cash payment limits in other jurisdictions, Mr Patrick Boneham of the Treasury stated:
The central Bank of Italy found that it has had a positive impact on illicit cash in Italy. Greece, France and I think Bulgaria have found that it's had a positive impact on tax evasion.
The anonymity that cash provides was also a concern for Chartered Accountants Australia and New Zealand (CAANZ), which stated that it can be exploited by those who participate in the black economy and undertake other criminal activities. Expanding upon this, in her evidence to the committee, Ms Susan Franks of CAANZ noted the following:
Black economy participants often use cash as it's untraceable. The Australian Criminal Intelligence Commission says that the ability to use cash to purchase high-value assets such as luxury cars, boats, homes and jewellery is a key enabler of financial crime. It allows black-economy participants to realise the benefits of their illicit operations and to store value. The proposal to restrict large cash payments makes it much more difficult for participants in the black economy to do this.
CAANZ indicated that their members frequently report that clients struggle due to competitors not playing by the rules, especially in high value sectors where cash transactions are common and encouraged, such as building and construction, and motor vehicle sales. In her evidence, Ms Franks articulated this negative impact as follows:
Participants in the hidden economy can destroy the viability of law‑abiding businesses and force others to cut corners to survive. Our members have told us about numerous businesses struggling to compete against those that offer mates rates for cash or pay workers cash under the table. These unfair practices can have devastating impacts both financially and emotionally on honest businesses. There needs to be a strong, coordinated approach to reduce the size of the black economy, as not only is the size of the black economy substantial, at three per cent of GDP, or $50 billion; it is also growing.
The Uniting Church in Australia (UCA) shared the government's concern that large cash payments facilitate money laundering in Australia and expressed its support for the bill. In its submission, the UCA referred to an evaluation undertaken by the Harvard Kennedy School in the United States of America, which drew the following conclusions:
Criminals like to use cash because it is so widely accepted, anonymous and virtually impossible to track. Cash thresholds make it harder to move large volumes of money into or out of the legal economy.
Cash thresholds are likely to have most impact on tax evasion and money laundering connected to organised crime, but relatively limited impact on terrorist finance or petty crime.
In his evidence to the committee, Mr Chris Douglas of Malkara Consulting indicated that major criminals commonly still rely on cash to settle transactions as alternatives, such as digital currencies, are volatile and can be traced. Given this, Malkara Consulting was supportive of the bill, and stated that the measures in the bill are generally sound and consistent with measures implemented by other countries to combat tax evasion, corruption, money laundering, and terrorism financing.
Flight Centre provided qualified support for the bill, stating that the black economy harms honest businesses and the broader community by penalising compliant taxpayers and undermines the integrity of Australia's tax and transfer system.
Both the UCA and CAANZ indicated that, in their opinion, cash transactions in excess of $10,000 are uncommon and unnecessary for the general public:
There appear to be minimal reasons why a person engaged in a lawful transaction would do so with a large amount of cash.
…with cash usage in rapid decline, examples of situations where the cash payment limit will cause actual difficulty in day‑to‑day transactions are hard to find.
In support of its position, UCA further quoted the evaluation undertaken by the Harvard Kennedy Business School in the United States of America, which stated:
There appear to be limited downsides to implementing cash thresholds in terms of impact on legitimate economic activity or concerns about individual privacy. The overwhelming majority of legitimate cash transactions are below the levels at which cash thresholds would be imposed. High-value cash transactions that are not motivated by illegal purpose appear to be rare and only relevant to a small, wealthy proportion of the population.
In evidence provided to the committee, the Reserve Bank of Australia (RBA) noted that, based on surveys it undertook between 2007 and 2019, the number of household payments made in cash has materially reduced over this period, from two in every three transactions in 2007 to one in every four in 2019, or, expressed as a percentage, a reduction from 66 per cent to 25 per cent. The RBA believes this reflects a range of factors, such as advances in digital technology and households realising that electronic payments may be a more efficient method to transact.
The RBA also noted that its 2016 survey showed the average size of cash transactions to be only $28, and that cash was primarily used for low-value transactions, accounting for two in every three transactions below $10.
The RBA highlighted the fact that, across the five household surveys it has undertaken since 2007, comprising 82,000 consumer payments made by 5,700 individuals, only 20 transactions were over $10,000; none of which used cash as a means of payment. Although acknowledging that there may be reporting bias due to a reluctance by individuals to report all their spending behaviour, the RBA concluded that:
…our survey suggests that very large transactions by households are very infrequent and, when they occur, they use electronic payment methods or occasionally cheques.
Comments raising potential issues with the bill
The committee received a large number of emails, letters, and documents from across the community which raised a number of recurring issues, concerns, and common themes. These issues, concerns, and themes, as well as those examined during the inquiry's public hearings, are discussed in further detail below.
Commencement date and implementation complexities
A number of organisations raised the issue that the bill's commencement date only provides them a few months to upgrade their systems and train their staff. For example, Flight Centre said that it would be unable to implement effective systems and training to ensure compliance with the aggregation requirements for payments related to individual bookings by 1 January 2020.
In his evidence to the committee, Mr Brett Anderson from Flight Centre highlighted this difficulty in the context of the travel industry. He gave the following example:
If someone comes in, they see a great deal on flights and they book those flights—that's a transaction. If they come in three months later, when they've actually thought about where they're going and what they want to do, and they go to book accommodation, the question we get is, 'Is that one transaction, or is that two transactions?' They've already invoiced and settled the first; now they're going to embark on another. It's part of the same booking and part of the same trip, but are they different transactions or are they the same transaction when it comes to this cash limit?
The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) also noted that:
The proposed commencement date of 1 January 2020 allows less than two months to educate small businesses, let alone the community at large.
Mr Andrew Ham from the Law Council of Australia, in responding to questioning by the committee, touched on this issue and stated:
My other major concern is the impact on business. In order for businesses to be able to track instalment payments, which would be captured by this ban, and to be able to defend themselves if there was ever an accusation against the business itself, they are going to need to potentially rebuild their whole finance system in order to identify when they are in receipt of cash as payment, or indeed paid cash, or when it's some other form of payment. That is a ground-up, potentially enormous IT exercise.
Given their concerns around the offence provisions and implementation complexities, both Flight Centre and the ASBFEO recommended the bill's commencement date be postponed until no earlier than 1 January 2021.
Further, both the ASBFEO and the UCA recommended that a resourced communications strategy be developed, and delivered, prior to the bill's commencement to ensure the community is aware of the obligations and offences that are created. Specifically, the ASBFEO stated:
As criminal offences are involved, and people are likely to be unaware that a series of apparently separate transactions may be linked together as a 'supply', especially where a small business can unknowingly be in breach, the government owes a duty to the population to ensure a comprehensive media campaign is undertaken before implementation.
The committee, as well as a number of submitters, recognised that the committee's reporting date post-dates the bill's commencement date of 1 January 2020, potentially giving rise to retrospective legislation containing significant offence provisions.
The committee sought clarity from the government on this issue, and was assured, via written correspondence from the Assistant Treasurer, the Hon. Mr Michael Sukkar MP, that the government does not intend for the bill, if passed by the Parliament, to be retrospective. The Assistant Treasurer stated that a new commencement date would be determined following consideration of the committee's report.
Rules determined by the minister
The bill provides the minister with the power to make rules and prescribe matters where permitted by the bill. Amongst other things, this allows the minister to prescribe exemptions from cash payment limit offences.
Per the EM, rules made by the minister are a legislative instrument and, hence, are subject to tabling, disallowance, and all the other requirements set out in the Legislation Act 2003.
Notwithstanding the above requirements for rules made by the minister, a large number of inquiry participants were concerned with this power, and argued that it provides the minister with too much discretion to determine which transactions are exempted from the cash payment limit, and to amend the exemptions whenever he or she chooses.
Although recognising the need to ensure flexibility within the regulatory regime, CPA Australia stated that the parliamentary process is critical to ensure adequate oversight of exceptions and modifications. It believes that, at a minimum, the currently identifiable exceptions should be included directly in the bill. To support this, it refers to the views expressed by the Standing Committee for the Scrutiny of Bills, which recommended a similar approach:
The committee's view is that significant matters, such as the kinds of transactions that will be exempt from offences, should be included in the primary legislation unless a sound justification for the use of delegated legislation is provided.
Further, CPA Australia also recommended that, to avoid unintended consequences with respect to the use of legislative instruments, the government should reconsider allowing the minister to add additional exemptions through their use.
In response to these concerns raised by the Standing Committee for the Scrutiny of Bills, and echoed by CPA Australia, the Assistant Treasurer advised that, as he expects future changes to involve expanding or reducing the scope of existing exceptions, it would be cumbersome, and unnecessarily complex, to have the currently known exemptions in primary legislation, with additional and amending exemptions in delegated legislation. He also stated that it is important for the legislative framework to provide adequate flexibility to ensure that new transactions and practices are not inappropriately affected by the cash payment limit.
The Assistant Treasurer also noted in his advice that placing all exceptions in delegated legislation would reduce compliance costs and red tape for business, as the rules would be easier to find, and simpler to understand and apply.
The effects of inflation
Given the static nature of the $10,000 cash payment limit, the effect of inflation was raised as an issue by submitters and witnesses. For example, the Chief Executive Officer of Freelancer, Mr Matt Barrie, highlighted that:
Based on the past performance of the Australian dollar since inception, in 10 years from now the $10,000 threshold will have the buying power of a little over $8000 and in 50 years less than $770 in today’s money.
This issue was also raised during the committee's public hearing on 12 December 2019, where Ms Emilie Dye of the Australian Taxpayers' Alliance stated:
Some may argue that only a few people regularly withdraw $10,000 in cash, so, supposedly, only a few people would be impacted by a $10,000 cash threshold. But, because of inflation, this threshold would encroach on all Australians. In one year, assuming inflation remains consistent, the threshold would effectively drop to $9,800. In 10 years the threshold would be approximately $2,000 lower than what is currently being proposed.
A potential solution to this issue was proposed by the UCA, which recommended that a legislative requirement be added to the bill requiring the government to undertake a review in three years' time. Such a requirement could serve a number of functions, such as to allow for the assessment of the impacts of the cash payment limit and whether arrangements have been developed in an attempt to circumvent it.
Vulnerable groups and migrant communities
There was recognition among some submitters and witnesses that the bill may adversely affect vulnerable groups and migrant communities.
In his opening remarks, Mr Andrew Pinder, the National President of the Australian Funeral Directors' Association, spoke about this issue and stated that the bill misses the mark on the funerals sector and would operate harshly on elderly and migrant communities.
In explaining this assertion, and how it related to the funerals sector, Mr Pinder stated that:
Those who are elderly are often not technologically savvy. Some are but most aren't. For those who do have credit cards or debit cards, their limits are generally nowhere near $10,000; they're around $1,000 or $2,000.
A number of people wish to avoid bank cheque fees—they may have mobility issues in getting to banks, avoiding the queues, there are fewer branches these days and personal cheques are being phased out.
Migrant funerals are more likely to be above $10,000. Many migrant communities have burial rather than cremation, and burial is more expensive than cremation. The cost of burial sites for migrant communities—for example, Christian Orthodox communities in metropolitan cities—has doubled or trebled in the last five to seven years in some areas. It's not hard to get over $10,000 for a funeral when it involves a burial and a monumental grave.
To provide the committee with an appreciation of those communities potentially impacted by the bill, Mr Pinder listed a number of religious groups which he believed would be impacted by the bill:
The Christian Orthodox community is extensive. It includes Greek Orthodox; Macedonian; Serbian; Ukrainian; Russian; Bulgarian; Coptic, which is Egyptian; and Antiochian, which is Lebanese. It's a very widespread religion. It also impacts European Catholic communities such as Polish and Croatian, and Buddhist communities have a preference for paying cash in Vietnamese and Chinese communities. Those are the communities that will be impacted by this bill most profoundly.
In his evidence to the committee, Mr Anthony Richards, the head of payments policy within the RBA, noted the importance of cash to various groups. Specifically he stated that:
…cash is still a very important payment method for a significant portion of the population, especially for older and lower-income households, those living in regional and remote areas and those with disabilities.
Notwithstanding this, Dr Richard Finlay of the RBA noted that, although cash remains important to various groups, cash transactions above $10,000 are incredibly rare.
Mr Andrew Ham from the Law Council of Australia, spoke about this issue and stated that:
The ban in particular is likely to have a significant practical impact on day‑to‑day business transactions and imposes a substantial burden on business and criminal liability on a large and potentially vulnerable proportion of the population.
In light of these concerns, the UCA recommended the government:
…establish support for vulnerable groups, such as people with mental health problems and older people, who have trouble navigating the financial system and therefore still make large payments in cash.
In contrast to the above, Malkara Consulting stated in its submission that the general argument that older and poorer people, or those living in remote locations, will be unable to utilise digital technologies are too broad and, hence, should be discounted. In support of this, it stated that modern technologies are easy to utilise and believes that the arguments put forward give these community groups little credit for their ability to adapt.
Regulatory costs and the allocation of responsibilities
The government estimates that regulatory costs incurred by the community will be minor, stating that the bill does not introduce additional reporting requirements on businesses, and payments exceeding the limit are likely to be infrequent with most businesses utilising the banking system.
Although the EM states the cash payment limit is estimated to have an unquantifiable impact on revenue over the forward estimates, it does not provide guidance on the additional expenditure required to enforce the provisions of the bill through additional investigations and prosecutions of the offences it creates.
This omission was raised as a concern by Adams Economics, which stated that it is unclear how the government intends to enforce the cash payment limit. Malkara Consulting also raised this in its submission, stating that:
The explanatory memorandum (EM) states that the regulatory costs are estimated to be minor.
What the EM is referring to in relation to business is compliance cost not regulatory cost which must be borne by Government authorities. As is frequently the case, the Federal Government introduces new laws and fails to equip the agencies responsible for enforcing them with the necessary resources.
Notwithstanding this omission, Malkara Consulting suggests that the Australian Taxation Office be provided with adequate resources to educate the public and to implement the cash payment limit effectively.
In answering questions asked by the committee, Mr Patrick Boneham of the Treasury stated:
In relation to who is responsible for the bill, Treasury are responsible for the policy and we will also be doing the guidance, so that is different to other tax measures. Once a tax measure is passed, generally, responsibility for implementation will move on to the ATO—that is, both enforcement and guidance. In this case, guidance will be done by us. Enforcement is probably going to be an amalgam. There is no one agency responsible for this.
In its submission, Flight Centre indicated that such a model of enforcement may create issues. Specifically it stated that:
…multiple bodies providing input and oversight will be an unsatisfactory regulatory approach.
Without a single regulator, the measures are unlikely to be properly enforced and cause regulatory challenges complying with the legislation.
Given this, Flight Centre recommended that a single regulator provide supervision and oversight to ensure compliance with the cash payment limit.
Privacy and civil liberties
A number of submitters and witnesses indicated that they believed the bill would adversely impact their privacy and civil liberties. For example, Dr David Korchok stated in his submission that governments and private entities, such as banks, should not be able to monitor purchases and transactions. He argued that the use of cash allows individuals to effectively avoid this unwanted monitoring. Similarly, Ms Lina Zielinski stated that:
We have the right to privacy and not have our every financial transaction tracked.
Further, in evidence provided to the committee, Mr Peter Wilson of the New South Wales Farmers' Association indicated that, in his opinion, the bill's costs would outweigh its benefits, and that existing measures are already in place. Specifically, he stated:
What we object to is simply the extra regulation and the extra infringement on civil liberties without, in our view, any significant benefit or benefits that could not otherwise be achieved through existing means or beefed-up existing means. You've already got your cash-reporting legislation.
In contrast to the above evidence, in its submission, Malkara Consulting did not see privacy as an issue, stating:
The proposed restriction on the use of cash by the Federal Government is insignificant compared to the already extensive use of private information collected and held by non-government entities.
Digital infrastructure failure and access in remote locations
A large number of submitters raised the issue around the reliability and security of electronic payment systems, and questioned how dependable they are for conducting business in remote regions. In her submission, Ms Melissa Harrison noted that multiple outages in 2019 adversely impacted a number of prominent Australian companies and their customers. Based on this, she concluded:
…these digital platforms cannot be relied upon to be always available and failure of electronic systems can be disruptive to our economy and daily lives.
Ms Lina Zielinski also pointed out that, in contrast to cash, which is physical and reliable, Australia's digital systems are susceptible to outages and potential sabotage, resulting in costs to businesses through lost revenues, time, and inconvenience.
Given that many of its members operate in Australia's remote regions, the Opal Association (the OA) believes the bill is poorly thought out and would harm small businesses and miners. They state that their members prefer cash payments for their immediacy, as buyers are commonly unknown to sellers and cheques and bank transfers take time to clear. The OA indicated that, as a result of this bill, miners may withhold their stock from domestic sale and instead market them overseas where buyers can continue to pay cash.
The ASFBEO and Dr Wilson Sy also raised this as an issue with the bill, stating in their respective submissions that:
Regional and remote small businesses and pastoral family enterprises in rural Australia do not have reliable access to the internet and electronic banking facilities; often even land line and mobile telephone services are intermittent.
…there are real risks of unintended consequences ignored by the Bill. Banks and technology are not reliable enough and that their failures could cause serious economic damage.
For risk mitigation, Australians need all available options for payment because more than elsewhere in the world, Australia has great diversity in culture, geography and economic situations.
In its submission, CAANZ noted the concerns of other submitters on this issue, but highlighted that the proposed rules, currently available in exposure draft form, make provisions for situations where non-cash payments are unavailable.
Necessity and effectiveness
A number of submissions disputed the taskforce's estimation of the scale of Australia's black economy and, hence, the necessity of the bill. For example, in their respective submissions, the Citizens Party and Adams Economics referenced studies undertaken by the International Monetary Fund which, in their opinion, indicate that Australia does not have a serious problem.
In his evidence to the committee, Mr John Adams from Adams Economics further articulated this point stating that:
The leading international expert on the black economy, Professor Schneider from Austria…suggests that the black economy in Australia has actually been shrinking over the last 20 to 25 years; it has not been growing.
If you go to the size of the Australian black economy in 2015, it was, according to Professor Schneider's estimates, basically the fifth smallest in the OECD.
In its submission, Adams Economics also noted its concern that the government has not conducted a cost-benefit analysis for the cash payment limit, and hence, has not demonstrated the proposal will deliver quantifiable net benefits for Australia.
In her evidence to the committee, Ms Emilie Dye of the Australian Taxpayers' Alliance raised doubts about the costs of the bill and its effectiveness in reducing crime. She stated:
Many will argue undermining criminals and illegal behaviour is worth the cost of these restrictions. But, in reality, cash restrictions will do little to reduce crime and instead treat law-abiding citizens like criminals that cannot be trusted with privacy. Businesses are already required to disclose large cash transactions to the Australian Transaction Reports and Analysis Centre, or AUSTRAC. Criminals who are already breaking the law to launder money or avoid taxes will just as readily break this law. Money launderers already use untraceable cash and would be undeterred by this new law.
CPA Australia expressed that existing powers and offences are sufficient to address the black economy. Specifically, it stated in its submission that:
Neither the Black Economy Taskforce Report, the consultation paper nor the Explanatory Memorandum satisfactorily addresses the question of why the significant range of existing powers and information available to government is insufficient to address the black economy, and why the criminalisation of cash transactions is the appropriate solution.
Given this, CPA Australia suggested that:
…better enforcement using existing powers and ongoing government support of the digital economy will, in the longer term, better resolve these issues without encroaching on legitimate business operations or the use of legal tender. The reporting of suspicious matters under the AML/CTF and the ATO’s newly established Tax Integrity Centre could also be improved and be more effectively actioned by government agencies.
Mr Chris Douglas of Malkara Consulting, in his evidence to the committee, asserted that the proposed limit was, in his opinion, too high, and that a lower limit would be more effective in reducing tax evasion and money laundering. Specifically, he stated:
…while it [the $10,000 cash payment limit] would have an impact on tax evasion and money laundering, a top limit of $2,000 would be more effective in achieving the objectives of the bill. It has been my experience that the majority of cash purchases that occur above $2,000 are for whitegoods, electrical goods, second-hand cars and motorbikes, furniture, jewellery, gold, boat engines, carpets, tiles et cetera.
Promotion of the privately‑owned banking system
A number of submitters raised concerns that the cash payment limit will push people into the privately-owned banking system, which serves private interests, charges high fees, and is not required to offer services to all within the community. For example, Mr Jordan Ralph stated that:
This Bill risks locking Australians into a banking system dominated by 4 major companies serving private interests, companies which have already been proven to treat their customers and broader public with contempt. Companies which have demonstrated that profit making is elevated above all other moral imperatives.
In his submission to the committee, Mr David Korchok also raised his concerns regarding this, stating:
People use cash to avoid transacting within the banking system. In doing so, businesses avoid high transaction fees charged by banks, credit card fees, suspension/cancellation of accounts, power outage failures that dis-enable account access or rural inaccessibility, and scrutiny of purchases by private banks which can deny home loans based on consumption patterns. In short, people can avoid a middle party in order to avoid all of the above things, and it is there right to do so. It does not mean that they are doing anything illegal. They are within their rights to maintain privacy and freedoms.
This was also discussed by Ms Emilie Dye of the Australian Taxpayers' Alliance in her opening remarks to the committee, where she stated:
In addition to the invasion of privacy, this policy would gift the big four banks a whole new customer base…The banks could then charge more fees, lower interest rates, provide poorer service and neglect to innovate, because demand for their service has been forced to increase while supply has remained constant. Monopolies and oligopolies always harm consumers, especially when the corporations involved are propped up by protectionist legislation. Australia's royal commission has revealed a long backlog of dubious behaviour, such as banks charging for advisory services they never intended to provide and knowingly charging fees to dead customers.
In contrast to the above, Malkara Consulting noted in its submission that:
…while there were serious forms of misbehaviour identified during the banking royal commission, the Australian banking system is still one of the most reliable, efficient and safest systems in the world.
The push by the Australian Government and most world governments to get people using the banking system is not new. In Australia, the process gained significant momentum about 30 years ago when the Australian Government introduced direct credit payments to bank accounts for all welfare recipients.
Primarily designed to reduce fraud and the cost in providing payments to welfare recipients, the move increased the participation rate or financial inclusion, of Australians in the formal banking sector. It was a sensible policy initiative at the time and continues to this day.
Fees and charges
There was widespread concern by submitters regarding various fees charged by the banks, either directly or indirectly, when using their services to transact. In responding to questioning by the committee regarding the size of merchant fees, which are commonly passed on to customers, the RBA noted that policy action has exerted downward pressure on fees paid by these merchants and, as a result, these fees are 'significantly lower' than those charged in other countries. Specifically, the head of payments policy, Mr Anthony Richards, stated in his evidence to the committee:
The cost of payments in Australia is actually low by international standards—that's the cost of accepting payments by card. The cost of debit cards is around, on average, 50 basis points, or half a per cent; and the cost of receiving credit cards is in the order of about 80 basis points, or 0.8 per cent. That's low by international standards.
Mr Richards also noted that since various reforms were implemented in 2016:
The merchant may not pass on an additional cost that is any larger than their cost of acceptance that they are being charged by their bank.
I think we can be confident that any surcharges charged by merchants for card acceptance are no more than their cost of acceptance that they have to pay their provider of financial services.
Mr Michael Croker of CAANZ also highlighted the fact that holding cash outside the banking system is not necessarily cost‑free, and commonly incurs insurance costs and the bearing of additional security risk.
Inability to hold a bank account
mHITs Limited (mHITs), in its submission to the inquiry, raised the issue that banks do not necessarily provide their services to everyone in the community. mHITs states that some firms operating within the remittance industry are currently unable to a hold bank account due to the banking industry's concerns regarding its obligations under the Anti-Money Laundering and Counter‑Terrorism Financing Act 2006. Hence, these firms, which currently utilise cash to conduct their business, will be unable to legally continue; potentially forcing them into the black economy.
Given this, and the fact that registered remittance businesses are already subjected to regulatory oversight by AUSTRAC, mHITs recommends that these entities be exempted from the cash payment limit.
This issue was also raised by Mr Brian Marlow of the Australian Taxpayers' Alliance who stated that various legitimate businesses would be adversely impacted by 'banks not wanting to allow them to use their payment processing services and having to rely on cash transactions or even cryptocurrency'.
Reinforcing Mr Marlow's evidence, Mr Adams of Adams Economics stated:
…the phenomena of debanking—which was mentioned at the last public hearing—also means that the proposed law may result in the closure of legitimate businesses who are denied access to banking services.
Cash as a store of value
In contrast to the declining use of cash as a payment method, research undertaken by the RBA indicates that the use of cash as a store of value has been increasing over recent years. Upon questioning by the committee, the RBA referenced this prior research stating that it indicated only one in four outstanding bank notes are used to transact; two in three are held as a store of wealth by Australian residents and foreigners; and the balance are used in the black economy, or have been lost.
CAANZ also identifies this alternative use for cash, and noted that, in accordance with the EM, the cash payment limit will not impact a person or entity's ability to retain wealth, in cash, outside of the banking system.
Significant offence provisions and penalties
To give effect to the cash payment limit, the bill establishes new offences for entities that make or accept cash payments that equal or exceed the cash payment limit. The EM states:
The use of criminal sanctions reflects the harm to the wider community that was identified in the Final Report of the Black Economy Taskforce. The use of an effective deterrent is required to change existing practices that have facilitated participation in black economy and particularly the use of cash payments to conceal income and criminal activity.
A number of submitters raised concerns regarding these offences and the severity of their penalties. For example, Ms Melissa Harrison took particular issue with the two strict liability offences [clause 12], stating that the penalties are disproportionate and unjust.
CPA Australia is concerned that the bill introduces vicarious criminal liability, noting that, while the attribution of liability through agency and joint and several liability is acceptable in civil law, in criminal law it may well be without precedent.
In their submission, Flight Centre raised concerns regarding the offence provisions and recommended the government consider providing a defence for corporations which can demonstrate that adequate procedures, designed to prevent misconduct, were in place at the time the offence was committed. Mr Brett Anderson articulated Flight Centre's concerns as follows:
While you can have all the processes, procedures, policies, monitoring, compliance, regulation and governance in the world in place, we are all human in the end. Errors will be made, not necessarily intentionally. They could be just general mistakes. There could be multiple reasons. A customer may have started a transaction with a particular consultant. That consultant may be on leave or may have left. Another consultant will then take over the transaction. They may not be aware of the history of that customer. They might end up receiving cash more than the limit, and we would have a breach. Those sorts of things are very challenging. If there is absolutely no defence for a corporate who shows that they've done everything that they possibly can to manage the risk of a breach in their business, I think it's a really severe approach.
As highlighted in chapter 1, the Standing Committee for the Scrutiny of Bills also raised the imposition of significant penalties within clause 13 as a concern, stating:
Noting the lack of detail in the explanatory memorandum, it is not apparent to the committee that the penalties in clause 13 of the bill are appropriate by reference to comparable Commonwealth offences and the requirements in the Guide to Framing Commonwealth Offences.
The committee therefore requests the minister's more detailed advice as to the justification for the significant custodial penalty proposed in clause 13. In particular, the committee requests the minister's advice as to specific examples of applicable penalties for comparable Commonwealth offence provisions.
In responding to the concerns raised regarding clause 13 by the Standing Committee for the Scrutiny of Bills, the Assistant Treasurer advised that:
…it was identified that the existing offences to which they were most closely comparable were the offences relating to dealing in the proceeds of crime in Division 400 of the Criminal Code as these offences similarly involve conduct that facilitates or enables other criminal activity.
The Assistant Treasurer also made the more general point regarding criminal penalties:
…I consider that it is important that an appropriate period of imprisonment be available to the courts as a maximum penalty for entities that recklessly flout the cash payment limit. Criminal activity associated with the black economy is a serious problem for Australia. The use of large cash payment is key in facilitating activity in the black economy and a substantial deterrent is required to change existing practices and behaviours that enable this conduct.
The committee thanks all inquiry participants who took the time to prepare and lodge a written submission and attend public hearings. It has reviewed each and every submission, and taken into account the issues, concerns, and suggestions raised.
The committee acknowledges the growing frustration within the community regarding the black economy and the negative impacts it has on law-abiding businesses and individuals, and agrees that the government must act to reduce these impacts. The committee also acknowledges the importance of cash as legal tender both for transactions and as a store of value. It is important that the government strikes the correct balance in this regard.
The committee also acknowledges the concerns raised by a number of inquiry participants regarding the bill's impact on privacy and civil liberties. Once again, this must be balanced against the concerns raised by other stakeholders who described the negative impacts of criminal activity and tax evasion.
The committee notes the legitimate concerns of stakeholders regarding the potential retrospective application of the cash payment limit. The committee thanks the Assistant Treasurer for his assurance that, if the bill is passed by the Parliament, the government does not intend for it to be retrospective, and that a new commencement date will be determined.
Based on the evidence provided, the committee agrees that non-cash payment methods create clearer records; are usually more convenient for consumers and businesses; and increasingly involve lower costs, as they simplify record keeping and avoid the security, insurance, and other costs associated with handling and holding cash. In one sense, people are voting with their behaviour in moving away from cash to electronic transactions.
Nevertheless, it is not clear to the committee that the penalty provisions are appropriate. Given the advice to the Standing Committee for the Scrutiny of Bills from the Assistant Treasurer, the committee is concerned that a disproportionate penalty could be applied to a small or medium-sized business, whose processes and procedures may not be as sophisticated as larger businesses.
The committee notes the evidence from some submitters that particular migrant communities may be adversely impacted, as some cultures may have a preference to transact in cash. This may be due to a lack of trust in institutions resulting from their past experiences in other countries.
Whilst sympathetic to this as a possibility, the committee is of the view that that these communities and individuals are as capable as the broader population in complying with the law. However, special consideration may need to be given in relation to particular cultural activities, such as funerals. This is difficult to assess on the information before the committee.
Although sympathetic to the argument that the real value
(i.e. inflation‑adjusted value) of the cash payment limit will likely decline due to inflation, the committee does not believe that an inflation-indexed cash payment limit would be practical to implement.
The committee is satisfied that the government, through publishing its exposure draft of the rules, adequately provides for situations where non-cash payment methods are unavailable. Such situations may occur due to geographical remoteness; natural disasters, such as bushfires and flooding; and general hardware failures and outages. The Committee however, remains concerned about the responsiveness of those provisions and the ability to communicate any exemption during natural disasters.
The committee is concerned for those individuals and businesses that, due to various reasons, are unable to hold a bank account. The committee seeks guidance from the government on how it proposes these individuals cost‑effectively undertake transactions which equal, or exceed, the cash payment limit.
The committee acknowledges that there is confusion within the community regarding how the cash payment limit would work at a practical level within certain industries. Given this, and acknowledging the Assistant Treasurer's letter to the Chair, the committee recommends the commencement date of the bill be extended, and that a final agreed date be informed through consultation with business to allow sufficient time to implement system changes and undertake training, as required.
The committee is also concerned about the numerous unsubstantiated claims regarding the bill's impact that have accompanied its introduction. Given the potential impact on individuals and businesses, the committee believes the government needs to implement a comprehensive communications strategy to inform the public and business of their responsibilities.
The committee reiterates that, contrary to a number of inquiry participants' claims, cash will remain legal tender within Australia if the cash payment limit comes into effect, and individuals and businesses will continue to be able to withdraw money, in any denomination, from their bank accounts and hold it outside the financial system. Similarly, the committee notes the cash payment limit will have no effect on the ability to deposit cash with a financial institution.
The committee recommends that the exemption for payments relating to personal and private transactions be placed in the primary legislation (this exemption is currently contained within clause 7 of the exposure draft rules published by the Treasury). This approach provides certainty to the community, whilst also allowing the government to act quickly if there are unintended consequences resulting from the broader exemptions. Importantly, the committee notes that all remaining exemptions contained within the rules can be disallowed by the Parliament, if necessary.
The committee recommends, noting the evidence from CPA Australia and others, the government review existing powers and trends in the digital economy to assess whether the bill is the most effective response to the black economy.
The committee recommends the government review the penalty provisions, particularly in relation to one-off breaches as opposed to repeated offences, which are more likely to be money laundering and tax evasion, to ensure they are not overly harsh.
The committee recommends the government respond to concerns raised by the Australian Small Business and Family Enterprise Ombudsman, and others, regarding the availability of electronic banking services (ATMs and internet banking) in remote and regional Australia, including during natural disasters, and whether there will be a detrimental economic impact on those areas.
The committee recommends the government assess the impact of the bill on particular migrant communities, particularly in relation to funerals, to determine if there are potential negative impacts.
The committee recommends the commencement date of the bill be extended, and that a final agreed date be informed through consultation with business to allow sufficient time for businesses to implement system changes and undertake training, as required.
The committee recommends the government develop a communications strategy to assist in dispelling some of the unsubstantiated claims regarding the bill. The strategy needs to be in place before the commencement of the bill to allow sufficient time to inform the public and businesses of their responsibilities.
The committee recommends the exemption for payments relating to personal and private transactions be provided for directly in the bill.
Contingent on the above recommendations, the committee recommends the bill be passed.
Senator Slade Brockman