Australia has just introduced a new law that restricts every single Australian from paying too much in cash. The decision was made about a week ago, but the fallout can already be seen.
According to law, Australian citizens and enterprises cannot make payments larger than $7,500 in cash. Which is a massive hit to small businesses locally, as nearly 37% of Australians still utilize cash as their go-to payment method.
The government has stated that the new law was due to an increase in tax evasion, unlawful transactions and an increase of the size of the black market.
SMEs in panic
One of the small business owners of Australia has already stated that his whole business model has been made obsolete due to this new law. According to the businessman,
“It was already hard to make payments due to the $10,000 cap in the past, but with this $7,500 it’s practically impossible now”.
The government has released clear guidelines that every transaction about $7,500 will have to be made either via credit card or a check issued by the bank. Although most small businesses don’t usually have this much as a single payment, there are still many that will have to completely revamp their business model.
A hidden target
The government may have said that the introduction was because of tax evasion, but many market specialists have already noted the fact that it is also a jab at the local gambling market. The number of gambling Aussies and live casino platforms in Australia has been on a slow upward spiral. Around 80% of the population has participated in gambling activities one way or another.
Furthermore, it has been confirmed that Aussies are the “largest losers” when it comes to gambling as the average monthly loss accounts to around $1,000 per person. But how does this law target casinos?
There were rumors in the past that casinos were making most of their profits through cash payments from table games, VIP rooms, and various other slots and bets. Due to such a large influx of cash every single day, these casinos were able to “change” their daily ledgers about income and net profit. This provided excuses in the future to pay fewer taxes and invest the remaining funds into a new venue, indoctrinating more and more Aussies.
The fight against gambling
As already mentioned in the article, Australia has one of the largest gambling problems in the world. To be more exact, it has one of the largest “loss figures”, while the UK is leading with “problem gamblers”.
Nevertheless, the Australian Liberal party was experiencing at least some pressure from the population to bring down the gambling numbers to a manageable level.
According to this year’s survey, the government was moderately successful.
Around 25% of the 25-35-year-old demographic reported having participated in gambling activities, while in 2017 37% had confirmed participation. However, this figure was not enough to justify “manageable levels”, due to the fact that a majority of gambling was not being tracked.
That is a whole different issue with third party payment providers and cryptocurrency transactions. Which the government also had in mind when introducing the cash cap law.
How are large corporations going to react
For large corporations, this is a great addition for their business model, especially payment providers, banks and micro-financing firms. As they would be the go-to middlemen when it comes to transferring funds.
Although banks were already dominating the financial sector of Australian, an influx of small business owners, with actual transactions worth more than $7,500 is definitely going to benefit them.
For SMEs however, it may spell trouble unless they switch to a digital payment platform. Although it can be classified as a negative influence for the country’s business development sector in the short-term. It is clear that the Liberal party is more oriented towards the long-term solution of switching from cash to digital economy. But the fees and long waiting hours that are guaranteed to follow these transactions, will definitely be a case for concern for small business owners.