This article is more than 2 years old

This article is more than 2 years old

Australians will face a crackdown on cash-in-hand payments in an attempt by government to reduce money laundering and tax evasion.

The Turnbull government has turned its attention to the “black economy” in an attempt to raise billions of extra dollars and intends to limit cash payments for purchase goods and services to $10,000.

The measure was announced in Tuesday’s budget, which introduced a suite of tax integrity measures aimed at individuals and companies.

The complete 2018 Australian budget: choose what matters to you Read more

“The black economy undermines community trust in the tax system, gives some businesses an unfair competitive advantage, puts pressure on margins of honest businesses, and often includes exploitation of vulnerable employees through the underpayment of wages and loss of entitlements,” said Kelly O’Dwyer, the financial services minister.

The government’s largest black economy measure is a crackdown on illicit tobacco, which it expects to raise $3.6bn over the next four years.

It says the three main sources of illicit tobacco in Australia are smuggling, leakage from licensed warehouses, and illicit domestic production. To combat this, it will create an illicit tobacco taskforce with powers to prosecute organised crime groups at the centre of the illicit tobacco trade.

It will introduce permits for all tobacco imports (except tobacco imported by travellers within duty-free limits), and require tobacco importers to pay all duty and tax liabilities upon importation. That is a change from the current system where tobacco can be imported and stored in licensed warehouses prior to taxes being paid.

Quick guide 2018 budget at a glance Show Hide • Tax cuts for middle low and middle income earners with most saving between $200 and $530 a year on their tax bill through a tax offset • Ambition for a flat tax rate by 2024 of 32.5% for everyone earning between $41,000 and $200,000 • $4.5bn earmarked for roads, but major public transport projects will have to wait years for the lion's share of funding announced in the budget. $24.5 billion has been directed to new commitments, but only $4bn of that is being spent in the next four years • The controversial robodebt electronic debt recovery is to continue • Newly arrived migrants will have to wait another year to receive welfare assistance, while refugees will see their wait for Newstart doubled to 26 weeks • Superannuation funds to be banned from charging exit fees and fees for accounts under $3,000 will be limited to 3% • ABC to have its funding cut by $83.7 million over three years. Meanwhile a Captain Cook statue in Scott Morrison’s electorate is to be built at a cost of $25m • ‘Black’ economy is under the spotlight with government planning to claw back revenue it is losing to illegal tobacco. Home Affairs estimates it can earn $3.6 billion from a crackdown • Pensioners will be able to earn an additional $25 a week without reducing their pension. The pension loan scheme is also being expanded, which allows pensioners to use their homes as equity to boost their retirement incomes • $1.6bn is being spent to support an additional 14,000 additional high-level home care packages. A further $82.5m is being spent on mental health services for older Australians, including a $20m “loneliness” package, to help people “remain connected to their communities”. • New measures to help crack down on multinationals avoiding tax commitments. The government is also moving to add to previously announced measures to make sure income earned in Australia, can be taxed by Australia.

As part of the cash-in-hand crackdown the government will introduce an economy-wide cash payment limit of $10,000 to reduce money laundering and tax evasion, to apply from 1 July 2019.

It means transactions over $10,000 will have to be made through an electronic payment system or cheque when purchasing goods or services.

Transactions with financial institutions or consumer to consumer non-business transactions will not be affected.

The government is unsure how much money the measure will raise, however.

Meanwhile, in other measures, the government says companies will no longer be allowed to claim deductions for payments to their employees, such as wages, where they have not withheld any amount of PAYG from the payments, despite PAYG withholding requirements applying.

Never mind lofty talk of ‘tax reform’. This budget is about political survival | Katharine Murphy Read more

It will also remove deductions for payments made by businesses to contractors where the contractor does not provide an ABN and the business does not withhold any amount of PAYG.

For foreign investors, the government will crackdown on the use of so-called “stapled structures”.

It wants to make sure income earned in Australia, can be taxed by Australia. Those additional measures include strengthening the so-called “thin capitalisation” rules, which are meant to stop companies loading up on debt to shift profits offshore.

The government also wants to strengthen its anti-tax avoidance rules.

The measure will raise $400m in revenue over four years.