A controversial bill to ban cash payments of $10,000 and impose two-year jail sentences for people using cash for purchases above that limit, has passed the Lower House, but will not become law until after a Senate inquiry looks into the proposed laws.

Key points: Several MPs who voted against the cash ban bill are worried it could breach privacy and restrict freedom

Several MPs who voted against the cash ban bill are worried it could breach privacy and restrict freedom A Senate inquiry will consider the controversial bill, following significant community opposition

A Senate inquiry will consider the controversial bill, following significant community opposition Australians have until November 15 to make submissions to the Senate inquiry

The Currency (Restrictions on the Use of Cash) Bill 2019 passed the House of Representatives on Thursday.

The proposed law would force Australians to use electronic transactions or cheques over cash for payments above $10,000 and impose two-year jail sentences and fines of up to $25,200 if they don't.

The proposed change was first flagged by the Government's Black Economy Taskforce as a way to stop criminal gangs using large cash purchases of cars, houses and jewellery to launder their gains from illegal activities.

Assistant Treasurer Michael Sukkar had argued a $10,000 cash limit for transactions between businesses and individuals would help fight the cash economy by stamping out tax evasion, money laundering and other crimes.

"We know that large amounts of cash are essential to the business model of criminal gangs," he said.

"The cash payment limit will also help to disrupt organised crime syndicates, who try to wash the cash from the proceeds of manufacturing and selling drugs and other serious crimes through the legitimate economy.

"I look forward to working with the Senate to pass this important reform designed to protect honest Australians from being ripped off."

But the Government has faced opposition from some of its own MPs, as well as several lobby groups including the Australian Chamber of Commerce and Industry (ACCI), CPA Australia and the Institute of Public Affairs (IPA).

A number of politicians speaking before Parliament on Thursday about the proposed law noted significant community opposition, including fears the laws could restrict freedom and give authorities greater control.

The proposed law would apply to all payments made to businesses with an ABN for goods or services, affecting major purchases like cars, boats, housing and building renovations.

The Government has said the measure would not apply to individual-to-individual transactions, such as private sales where the seller does not have an ABN, or cash payments to financial institutions.

The proposed law also does not currently apply to digital currencies such as bitcoin.

MPs flooded with community objections

On Thursday, Labor's shadow assistant treasurer, Stephen Jones, moved an amendment to the Bill to include the words that it "recognises the importance of cash for conducting transactions around Australia" and "notes the concerns that have arisen in some parts of the community about the Bill".

Mr Jones told ABC News Australians who had any concerns should make submissions to the inquiry being held by the Senate Economics Legislation Committee.

Submissions to that inquiry close on November 15, and it will report back by February 7, 2020.

"There has been a lot of concern within the community about the impact of this bill," Mr Jones told Parliament on Thursday.

Podcast The Signal Australia's cash crackdown The Government is cracking down on Australia's 'black economy,' but critics say it just wants more control over your money. About

About Subscribe

Subscribe RSS Space to play or pause, M to mute, left and right arrows to seek, up and down arrows for volume. Listen More great ABC podcasts

"There wouldn't be a member in this house who hasn't received representations from constituents in relation to it."

He said while Labor would not be opposing the bill in the Lower House, it would work with the Government and crossbenches to see its "rigorous examination" and ensure all of the community concerns that had been raised with federal politicians "are thoroughly ventilated, investigated and dealt with".

"It is a significant provision, with significant penalties, and we want to ensure that there are no unintended consequences and that those community concerns can be dealt with," he said.

He said with Australians worried about the economy and low wages, it was no wonder, "members of the public are rightfully concerned when they see legislation such as this".

"They are saying: 'What is the real agenda here? What's going on? Why is the Government introducing this bill when they haven't dealt with any of these other issues which are affecting wellbeing at the household level?'" Mr Jones said.

Queensland MP Bob Katter opposed the Bill and reiterated his concerns in Parliament that the cash ban bill could breach people's privacy, citing George Orwell's classic novel, 1984, exploring how Big Brother uses surveillance to control citizens.

MPS concerned about 'negative' interest rates

Independent MP Andrew Wilkie said he would not be supporting the Bill, noting concerns it was about controlling people's behaviour at a time where many advanced countries were heading towards negative interest rates — a situation where instead of receiving money on deposits, depositors must pay regularly to keep their money with the bank.

He told Parliament he had been "approached by quite a lot of people in the community — not just constituents but people from right around Australia—who have expressed a broad range of concerns".

He said concerns included that it was, "designed to push people into the clutches of the banks so that they have to engage in the banking system, to concern that it's an attack on people's fundamental right to use cash".

"An interesting line of argument, which I think has some merit, is: if Australia does eventually reach negative interest rates, cash will assume new importance, but this bill will diminish the ability of people to use cash," Mr Wilkie said.

But he said his biggest concern was that "this bill is simply not necessary".

"There's already a requirement to report transactions over $10,000," Mr Wilkie said.

"The problem is that those laws are not being implemented and enforced."

Independent MP Andrew Wilkie said the bill was "designed to push people into the clutches of the banks". ( AAP: Mick Tsikas )

MP Rebekha Sharkie who also opposed the bill, said she had "strong reservations" because it, "exemplifies the nanny state that this Government pretends it has not become".

"Restricting people's ability to purchase products with cash and forcing them to use banks or other financial intermediaries for purchases over $10,000 is an unreasonable restriction on their personal freedom," Ms Sharkie told Parliament.

She said while cash could be a vehicle for money laundering, it was "grossly unfair" to label everyone who paid in cash as a criminal.

She feared ordinary Australians could be caught out under the proposed law given the defence under it was weak.

"It looks only at whether the person knew that there was a real risk that the payment would in essence result in their committing the strict liability offence, not whether the person actually intended to make the cash payment for some nefarious purpose," she said.

"We are focusing on criminalising their knowledge of risk rather than focusing on criminalising black economy activities that we actually want to stop."

Ms Sharkie also noted the negative interest rates concerns that had been raised by some members of the community, including some of her constituents.

"We have interest rates at an all-time low … essentially meaning it costs money for people with savings to have their money in the bank. But, with this bill, we are not providing them with any alternative, and that is just plain wrong," she said.