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As a part of the crackdown on black economy, the Government is planning to introduce an economy-wide cash payment limit of $10,000. Any payments made to businesses for goods and services from 1 July 2019 would be captured, and if the transaction exceeds $10,000, payment will need to be made using an electronic system or by cheque.

This proposed measure has been introduced in response to the findings of the Black Economy Taskforce Final Report. The report noted there were significant risks to legitimate commercial behaviour resulting from using large undocumented cash payments to purchase cars, yachts, other luxury goods, agricultural crops, houses, building renovations, and commodities. According to Minister for Revenue and Financial Services:

“We…know that businesses that insist on cash payment may be doing so to avoid their tax, retain welfare payments, or avoid child support and other obligations, and may therefore receive an unfair competitive advantage over those businesses that do the right thing.”

However, consumers should note that the cash transaction limit will only be imposed for payments (for goods and services) to entities holding an Australia Business Number (ABN). The proposal will not apply to consumer to non-business transactions, such as those in second-hand markets such as Gumtree, or where the selling party does not have an ABN.

Further, the proposal will also not apply to financial institutions, so there will be no impediment on the abilities of individuals, businesses, or other entities to deposit large amounts of cash with their bank or to deposit cash in paying off loans with a financial institution. Although, any such deposits would be caught under the existing Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) reporting requirements to AUSTRAC.

Currently, the Government is planning to leverage the AML/CTF obligations to assist in the administration and enforcement of the cash limit. A combination of threshold transaction reporting and reporting of suspicious matters will be deployed, with the Black Economy Hotline facilitating community referrals on suspicious behaviour. Penalties will apply to both parties to the transaction should the $10,000 limit be breached, that is, the payer and the receiving business. According to the Government this will ensure that both business requesting cash payments and consumers pressuring businesses to take cash in exchange for a discount are captured.

If Australia implements this proposal, it will be in good company and join many other European countries that have introduced cash payments limit. The UK is currently consulting on the issue in a bid to crack down on those who use cash to evade tax and launder money. It seems the inevitable crackdown on cash and its links to illegal activities and avoidance of tax has begun.

 

IN BRIEF__________________________________________________________________________________________________________________________

• Fraud is on the rise and is often very costly for victims.
• Gambling and financial pressures may encourage a trusted professional to commit fraud.
• Paul Andon FCA is speaking at CA ANZ’s Business Valuation and Forensic Accounting Conference 2018 in Sydney on 13-15 August.

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Fraud is on the rise and high-profile cases are often very costly for victims. The 2011-2012 case involving ING and a Sydney-based female accountant saw the multi-national insurance and finance company defrauded of A$43m.

Paul Andon FCA is an associate professor in the School of Accounting at the University of New South Wales whose research focuses on how individuals involved in fraud sustain their offending over long periods. His research examines case studies in the accounting profession and investigations into whistleblowing incentives.

Typical offender behaviour

“Situation is as much an important factor as the individual themselves,” he says. “People can be coerced. People may not necessarily be the kind of sociopathic type that may wish to engage in criminal behaviour but may still find themselves in a position where they feel like fraud is a necessity to deal with a personal problem.”

Andon’s research suggests that gambling has been a common driver of fraud and given rise to the “crisis responder”.

“A lot of people who engage in offending are doing so out of a feeling of necessity because, for example, they have a gambling problem, or because there are problems financially at home,” he says. “Fraud is seen as the only way out of their quite immediate and pressing financial problems.

“There are profiles around a typical offender but our research tries to push the fact that, depending on the situation, any character type or any personality type can be susceptible to finding themselves in a situation where they may look to commit fraud.”

Financial pressure

An individual’s environment and personal circumstances need to be considered when analysing the drivers of economic crime.

“A lawyer may find themselves in trouble professionally because they are not getting the revenue they need to keep their business afloat,” says Andon. “So they may look to source funds from their trust accounts to try and prop up the business.”

Individuals involved in crimes of necessity can be categorised as crisis responders, opportunity takers, opportunity seekers or deviant seekers. Andon is yet to find a trend favouring either long-term or short-term fraud.

“It can be a range of different sorts of pressures that people can experience that might lead them down what we call a ‘crisis responder’ driver to fraud,” Andon says.

Andon recalls a case that involved a married couple and battered wife syndrome. To deal with the pressure from her husband, the wife attempted to gain greater financial means to please her spouse and turned to fraud in an attempt to fund a better lifestyle.

Undetected fraud

Fraud can go undetected for long periods when perpetrators incrementally siphon funds from their victims over time. “So much fraud goes unreported,” Andon says. “Of the frauds we have looked at, which we put under the umbrella of ‘serious workplace fraud’, some can go on for a long time, decades even.”

While Andon doesn’t sympathise with white-collar criminals, his research leads him to believe that most people who commit fraud have experienced significant trauma.

“For the ordinary person it’s not necessarily this social psychopath that we are talking about when we are talking about fraud offenders,” he says.

“Many of them are every day, otherwise upstanding people and for some reason they have found themselves in a situation where they have cooked the books or engaged in fraud offending. They are stuck in that situation and it’s not something they can unwind easily. It can be quite a stressful situation.”

 

If you run a business, you’ve probably heard a lot about Single Touch Payroll (STP) recently, so what is it and how does it affect you? Basically, STP aligns your reporting obligations to the ATO to your payroll processes. Each pay cycle you send information to the ATO including employees’ salaries and wages, allowances, deductions, other payments (i.e. termination of employment, unused leave or parental leave pay), PAYG withholding and superannuation.

You do not need to change anything you do now, you can still pay your employees on a weekly, fortnightly, or monthly cycle. If you’re running a business with 20 or more employees, what you will need to do before 1 July 2018 is to check with your payroll software provider for an update that will send all the relevant information automatically to the ATO.

To find out if you’re running a business with 20 or more employees, for STP purposes, you need to do a headcount of your employees as at 1 April 2018. You will need to include, full-time employees, part-time employees, casual employees, employees based overseas, any employees absent or on leave (whether it be paid or unpaid), and seasonal workers, on the payroll on 1 April and that worked any time during March 2018. Directors and officeholders however are not included in this headcount as they are not considered to be “employees” within the common law meaning of the term.

As you can see, under STP, many businesses with less than 20 full-time equivalent employees could be caught under the system, therefore you need to be aware of your business’ obligations. When you contact your payroll software provider, if the update to STP is ready, you will need to start reporting through STP from 1 July 2018 (provided you’re an employer with 20 or more employees). However, a deferral may be applied for with the ATO if you think your business won’t be ready.

Some payroll software providers have already applied for more time to update their products, and if your business’ payroll software provider has a deferred start date, you do not need to apply for another deferral. If your business does not or will not have access to a payroll solution that is STP-ready you can ask a third party such as a registered agent or a payroll service provider to report STP data on your behalf.

If you’ve done the headcount and discover that you’re an employer with 19 or less employees, you can breathe a sigh of relief, STP isn’t due to start for you until 1 July 2019, but you can choose to report through STP before that date if your business and the software are both ready. As an administrative concession, during the first 12 months of a business reporting through STP, it will be exempt from administrative penalties for failing to report on time; unless the ATO has first given written notice advising that a failure to report on time in the future may attract a penalty.

This week, the NSW state budget revealed that the payroll tax threshold would be increased from $750,000 to $1 million over the next four years.

The threshold will be progressively increased, starting with an increase to –

$850,000 for 30 June 2019
$900,000 in 2019-20
$950,000 in 2020-21
$1 million in 2021-22

This adjusted payroll tax brings NSW in line with the thresholds already enjoyed by most other states and territories in Australia.
This movement in the threshold has been made as a result of continued lobby business networks and accounting bodies over a number of years.