Black economy legislation could punish innocent cash payments

Spending too much cash could soon become a criminal offence, attracting harsh penalties including jail time and hefty fines.

Proposed legislation to curb black economy activities by reducing cash payments could punish people who have legitimate reasons for paying in cash, says CPA Australia.

How much cash is too much? For most of us, having plenty of money on hand – hard currency, that is – may seem like a nice problem to have.

Cash, as the old saying goes, is king. However, it may not be for too much longer. If the Australian Federal Government gets its way, spending too much cash could soon become a criminal offence, attracting harsh penalties including jail time and hefty fines.

Under the proposed Currency (Restrictions on the use of Cash) Bill 2019, which was recently released for comment as a Treasury consultation paper, cash payments of A$10,000 or more between businesses and individuals for goods and services would become illegal.

Cash limits

The legislation, which is set to be put before federal parliament in 2019, follows a recommendation from the Black Economy Taskforce in 2017 for the introduction of a cash payment limit to constrict Australia’s cash economy. If passed, the new law will become effective from 1 January 2020.

The government’s proposed A$10,000 cash limit would not apply to private transactions between individuals, such as payments for the purchase of second-hand goods, and also would not capture cash deposits or withdrawals from financial institutions.

However, individuals using A$10,000 or more in cash to purchase items from a business, including those making a series of smaller cash payments where the total amount equals A$10,000, would face prosecution, up to two years in jail, and a maximum fine of A$25,200. The same penalties would apply to the cash recipients.

According to the government, an economy-wide cash payment limit “sends a strong signal to the community that it is not acceptable to avoid tax and other obligations by paying with cash”.

Cost of tax evasion

The Black Economy Taskforce has estimated that Australia’s cash economy is potentially worth up to A$50 billion a year. 

However, while CPA Australia supports the broad objective of eliminating illegal activities across the economy, including tax evasion and money laundering, it is concerned the proposed legislation could have unintended consequences for those who have legitimate reasons to make large cash payments.

“At the margin, the legislation has the propensity to turn normal mums and dads into criminals with very little, if any, recourse,” says Paul Drum FCPA, CPA Australia’s general manager, external affairs, policy and advocacy.

“Most people aren’t going to have large cash transactions, but just because you have a large transaction doesn’t mean that the money came from illegal activities or that it’s not going to be reported for tax purposes.

A step too far

In its submission to Treasury, CPA Australia supports the government’s efforts to address the black economy and recognises the diminishing need to undertake large cash transactions in the modern digitised economy.

“While we are aware that cash is an enabler of illegal activity, we have concerns about the government’s intention to impose only criminal penalties on the use of legal tender above the A$10,000 cap and the introduction of vicarious criminal liability,” CPA Australia’s submission notes.

“There are a number of existing checks and balances in the system to address criminal enterprises already, and to link all large cash transactions to criminality is a step too far.”

Adding to this point, Drum notes that despite the rigorous transaction reporting regime currently in place across Australia involving multiple regulators and other authorities, there is a problem with resources and enforcement.

“There are laws that already exist that are there to address illegal activity, but they’re not being properly enforced in every instance.”

CPA Australia notes in its submission that the Treasury 2018 consultation paper did not present a strong evidence-based case to justify the proposed extraordinary penalty for the use of legal tender, nor did it make mention of why criminal offences are seen as being the most appropriate solution.

“The presumption that only tax evaders, money launderers and criminals use cash, and the mindset that these new offences are required to address criminality, has resulted in a proposed bill and instrument that run counter to well-established criminal law principles and has the potential to affect many Australians.

“It extends criminal liability to innocent parties associated with a potential offender, such as partners in a partnership, and has application to Australian citizens and residents outside Australia.”

CPA Australia’s key recommendations

CPA Australia believes the policy intent behind the government’s bill would best be achieved by a mix of administrative penalties for breaches and incentives for business to move to electronic payment options.

“In addition to penalising those that are parties to large cash transactions, we suggest that there should be incentives for business to reduce their reliance on cash transactions, such as reducing or eliminating fees imposed on electronic banking transactions,” CPA Australia says in its submission.

CPA Australia also recommends that the proposed bill and instrument be withdrawn, and further consultation be undertaken to consider, among other things, more adequately resourcing regulators and other relevant agencies to address criminality using existing powers.

If the government proceeds, CPA Australia recommends the legislation be improved to clearly define the criminal act and intent, that the onus of proof be placed on the prosecution, rather than the defendant, that vicarious criminal liability is removed, and that defences available to defendants are enhanced.

“This legislation is attempting to deal with a symptom, not the cause, of the black economy. While the use of cash in a large transaction may be an indicator of risk, it does not prove by itself that the behaviour is criminal,” it says.

Read next: The black economy taskforce: what it means for accountants and their clients

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