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2019

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

Currency (Restrictions on the Use of Cash) Bill 2019

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

(Circulated by authority of the Minister for Housing and

Assistant Treasurer, the Hon Michael Sukkar MP)

 

 



Table of contents

Glossary............................................................................................................. 1

General outline and financial impact........................................................... 3

Chapter 1 ........... Restricting the use of cash............................................... 5

Chapter 2 ........... Statement of Compatibility with Human Rights.......... 19

 

 



The following abbreviations and acronyms are used throughout this Explanatory Memorandum.

Abbreviation

Definition

AML/CTF Act

Anti-Money Laundering and Counter-Terrorism Financing Act 2006

Bill

Currency (Restrictions on the Use of Cash) Bill 2019

Criminal Code

The Criminal Code in the Schedule to the Criminal Code Act 1995

FTR Act

Financial Transaction Reports Act 1988

ITAA 1997

Income Tax Assessment Act 1997

 



Restricting the use of cash

This Bill introduces offences for entities that make or accept cash payments of $10,000 or more.

These offences protect the integrity of the taxation law and other Commonwealth laws by ensuring that entities cannot avoid scrutiny and facilitate their participation in the black economy by making large payments in cash.

Date of effect The cash payment limit applies to payments made or received from 1 January 2020.

Proposal announced This Bill fully implements the measure Black Economy Package — introduction of an economy-wide cash payment limit from the 2018-19 Budget.

Financial impact The Bill is estimated to have an unquantifiable impact on revenue over the forward estimates.

Human rights implications :  This Bill engages with the right to the presumption of innocence and the right to privacy, but is consistent with those rights. See Statement of Compatibility with Human Rights — Chapter 2.

Compliance cost impact Regulatory costs are estimated to be minor. The cash payment limit does not introduce any additional reporting requirement on business. Payments that exceed the limit are likely to be infrequent and most businesses use banks accounts.

 

 



Chapter 1          

Restricting the use of cash

Outline of chapter

1.1                   This Bill introduces offences for entities that make or accept cash payments of $10,000 or more.

1.2                   These offences protect the integrity of the taxation law and other Commonwealth laws by ensuring that entities cannot avoid scrutiny and facilitate their participation in the black economy by making large payments in cash.

Context of amendments

Cash in Australia

1.3                   Cash traditionally consists of Australian currency - broadly notes and coins issued by the Commonwealth of Australia - and foreign currency - notes and coins issued by other jurisdictions, generally for use in those jurisdictions. The issue of notes and coinage by any other entity in Australia is generally illegal (see section 44 of the Reserve Bank Act 1959 and section 22 of the Currency Act 1965 ).

1.4                   Australian currency is generally legal tender in Australia - see section 16 of the Currency Act 1965 and section 36 of the Reserve Bank Act 1959 . While entities may specify or accept other non-monetary forms of payment for a debt, absent any such specification or acceptance, only payment in Australian currency will validly discharge a debt (see section 9 of the Currency Act 1965 ). Foreign currency is not legal tender in Australia, but can still be used as a form of monetary payment if this is agreed between the parties.

1.5                   That said, despite this status, cash is increasingly being replaced with various forms of electronic non-cash payments. These most commonly involve the use of debt or credit arrangements facilitated by banks and other payment system providers which, whilst generally designated in Australian currency, are forms of contractual arrangement between parties.

1.6                   These alternative payment methods are often more convenient for consumers or businesses and increasing involve a lower costs as they simplify record keeping and avoid the security, insurance and other costs associated with handling and holding large amounts of cash. They also generally offer significant regulatory benefits as they typically create clear records of transactions. As a result there are economic benefits arising from the growing use of these alternative payment methods.

1.7                   Many of these non-cash payment systems are subject to regulatory oversight by the Reserve Bank of Australia using its broad powers under the Payment Systems (Regulation) Act 1998 , the Payment Systems and Netting Act 1998 and the Reserve Bank Act 1959 .

1.8                   That said, some forms of electronic payment more closely mirror physical currency. In particular, crypto-currencies and other digital currencies are generally unregulated and often do not create clear records of transactions in a form that can easily be used to identify the parties to a transaction.

1.9                   To mitigate the risk that large, anonymous cash payments may be used to facilitate money laundering and terrorism financing, businesses that provide certain high risk services must report cash payments for goods and services of $10,000 or more under the AML/CTF Act. This includes businesses that provide financial services, deal in bullion and provide gambling and digital currency exchange services. Similarly, a person entering or departing Australia must declare amounts of physical currency of $10,000 or more (see section 53 of the AML/CTF Act). Certain other businesses must report other payments in excess of $10,000 under the FTR Act.

The report of the Black Economy Taskforce

1.10               The Final Report of the Black Economy Taskforce recommended the Government introduce a $10,000 cash payment limit for transactions between businesses and individuals.

1.11               In its response to the Report in the 2018-19 Budget, the Government announced that it would introduce a cash payment limit for such transactions with effect from 1 July 2019. This was extended to 1 January 2020 in the 2018-19 Mid-Year Economic and Fiscal Outlook.

1.12               Public consultation took place on exposure draft legislation to introduce a cash payment limit from 26 July 2019 to 12 August 2019.

1.13               The Government has also implemented a number of other measures in response to the other recommendations of the Final Report of the Black Economy Taskforce. These include establishing the Black Economy Standing Taskforce as a cross-agency body to address the challenges of the black economy, and setting up a hotline for individuals and business to report black economy and phoenix activity to serve as the basis for cross-agency action. 

Summary of new law

1.14               This Bill creates new offences that apply if an entity makes or accepts cash payments with a value that equals or exceeds the cash payment limit. However, the offence does not apply if the payment is either of a kind specified in the rules made under the Bill or made or accepted in circumstances of a kind specified in the rules.

1.15               The cash payment limit is $10,000. The Treasurer may specify how to convert an amount of foreign or digital currency into Australian dollars in the rules made under the Bill.

1.16               This Bill also provides rules, similar to the rules that apply in the context of the taxation law and under the AML/CTF Act, about the consequences that apply when an offence is committed by an entity that is not a legal person.

Detailed explanation of new law

1.17               This Bill establishes the cash payment limit of $10,000. The amount of this limit is consistent with the threshold for reporting under the AML/CTF threshold transaction reporting regime. It represents the point at which the payment is sufficiently large that the risk of facilitating substantial black economy and other illicit activity justifies the application of the limit. [Clause 8]

1.18               To give effect to this limit, this Bill establishes new offences for entities that make or accept cash payments that equal or exceed the cash payment limit. The use of criminal sanctions reflects the harm to the wider community that was identified in the Final Report of the Black Economy Taskforce. The use of an effective deterrent is required to change existing practices that have facilitated participation in black economy and particularly the use of cash payments to conceal income and criminal activity.

1.19               This Bill will ensure a fairer tax and regulatory system for all Australians by ensuring the majority of Australians that are doing the right thing are not are not disadvantaged in comparison with entities seeking to avoid their obligations.

1.20               The offences established by this Bill are relevant to the responsibilities of a number of Commonwealth regulatory and law enforcement agencies, and may be considered and investigated by those agencies in the course of their existing enforcement activities. Consistent with other criminal offences, primary responsibility for decisions to charge and prosecute offenders rests with the Australian Federal Police and the Commonwealth Department of Public Prosecutions.

1.21               Two of the offences established by this Bill apply if an entity makes or accepts a cash payment or series of payments, with strict liability applying to the circumstances of the payment or payments including cash of an amount equal to or exceeding the cash payment limit. That is, the offences are committed regardless of whether the entity intended to or was reckless about whether the payment or series of payments included such an amount of cash.

1.22               The other two, more serious, offences apply if the entity intends or is reckless about making or accepting such a payment or a series of payments.

1.23               The offences extend to all external territories and to some conduct that occurs outside Australia - see paragraphs 1.46 to 1.49. [Clause 6 of the Bill]

1.24               The Bill binds the Crown in all its capacities, but does not make the Crown liable to be prosecuted for an offence. [Clause 5 of the Bill]

1.25               The new offences only apply to making and accepting payments in excess of the cash payment limit. Nothing in the Bill makes it an offence to be in possession of cash of any amount.

Strict liability offences

Physical elements

1.26               The first strict liability offence applies if an entity makes or accepts a payment that is or includes an amount of cash that equals or exceeds the cash payment limit. [Subclause 12(1) of the Bill]

1.27               The offence applies to all entities, within the meaning of the ITAA 1997. Entity includes, among other things, individuals, bodies corporate, bodies politic, trusts and partnerships - that is, the structures through which Australians traditionally conduct business and which are subject to tax and other regulatory obligations.

1.28               Payment is used in its broadest sense encompassing any transfer of financial value. It is not limited to payments that are payments ‘for’ something and includes gifts and loans. Examples of payments include the provision of wages and a donation to a charity.

1.29               Whether an entity makes or accepts a payment is a question of fact to be determined using the ordinary meaning of those words.

1.30               A payment consists or includes cash if cash is provided as part of the payment. Cash is defined as physical and digital currency within the meaning of the AML/CTF Act. It includes notes and coins that are legal tender and circulated as a medium of exchange in Australia or a foreign jurisdiction and digital tokens that have similar characteristics. [Paragraph 12(1)(c) and the definition of ‘cash’ in clause 7 of the Bill]

1.31               While digital currency is included in the definition of cash, given ways in which digital currency is presently used in Australia, it is expected that the Treasurer will exempt most transactions involving digital currency from the cash payment limit. This exemption is expected to continue until such time as the use of digital currency changes and it presents a material risk of facilitating the same sorts of avoidance of obligations currently facilitated by physical currency.

1.32               The value of the cash provided is to be determined at the time of the payment. This value is its face value as currency; to the extent cash may have value other than as a medium of exchange this is not relevant (for example, a collectable coin). Some payments may involve an amount of foreign currency or digital currency. The Treasurer may determine methods for how to work out the value of such cash payments in Australian dollars in the rules. [Clause 9 of the Bill]

1.33               Allowing methods to be determined by legislative instrument is necessary to ensure that appropriate rules can be made to provide certainty for entities across the range of foreign currencies for which this is needed. It is consistent with the approach taken in the AML/CTF Act and other Commonwealth laws.

1.34               The second offence applies in the same circumstances as the first, except that you do not look to assess whether the payment itself equals or exceeds the cash payment limit, but you instead look to assess a series of payments that relate to a single supply or are a single gift and determine if, as a result of the payment, the amount of cash provided in the series of payments equals or exceeds the cash payment limit. [Subclause 12(3) of the Bill]

1.35               To constitute a series of payments, the payments must be for the same supply or part of a single gift. It is not sufficient that the payments occur between the same parties, even if they occur on a regular basis, where distinct things are supplied.

1.36               An example of a series of payments for a supply is the purchase of a car by instalments - all of the payments relate to the one supply (the car). An example of a series of payments that constitute a gift would be a case where an individual agrees to provide a very substantial donation to a charity in three instalments paid annually - each of the separate payments under the agreement is part of the one committed pledge. An example of payments that do not constitute a series are monthly payments of rent - each payment is for the use of the property for a different period, which is a separate supply - see paragraph 1.40.

1.37               Payments made for the same supply or gift may form part of a series of payments even if they are made by different entities. For example, if an individual purchases a car for $18,000 and pays $9,000 themselves and arranges for a relative to pay the balance, these two payments would form a series of payments for the supply of the car.

1.38               Generally, ‘supply’ is defined as having the same meaning as in the A New Tax System (Goods and Services Tax) Act 1999 . This means it includes ‘any supply whatsoever’. There has been considerable judicial scrutiny of the meaning of supply in the context of the A New Tax System (Goods and Services Tax) Act 1999 , much of which is outlined in the Commissioner of Taxation’s Goods and Services Tax Ruling GSTR 2006/9. This definition has been adopted here as it is sufficiently broad to reflect the policy intent while also being familiar to businesses, which will often need to consider the application of the GST to the same payment. Using an existing concept that is familiar to business minimises red tape and avoids additional complexity. [The definition of ‘supply’ in clause 7 of the Bill]

1.39               The nature of a supply or supplies should be understood in context and based on the arrangements agreed between the parties to the supply. For example, if an individual goes to a travel agent and makes separate bookings for a number of flights and hotels, then each of these bookings is likely to be for a separate supply. Alternatively, the individual may book a single package tour covering both travel and accommodation, which would likely be a single supply.

1.40               However, some supplies are made and paid for on a periodic basis - for example an apartment may be rented for a period of a year, with rent paid monthly. In this context, the definition of supply is modified to make clear that each part of the supply made and paid in relation to a defined period is a separate supply. This ensures that   payments relating to different periods do not form part of a series of payments for one supply. For example, this rule ensures that each monthly payment of rent under an annual lease relates to the supply of the premises for that month over the whole period of the lease. [Clause 10 of the Bill]

Fault elements

1.41               There are two different fault elements required for the physical elements of these two offences: intention and strict liability.

1.42               To commit these two offences the entity must have intended to make or accept a payment. If an entity inadvertently makes or accepts a payment, without knowing or being aware of what they are doing, then they have not committed the offence. For the second offence, the entity must also have intended that this payment is a payment for a supply or made as a gift. [Subclauses 12(1) and (3) of the Bill]

1.43               However, strict liability applies to in relation to the amount of the payment and whether it is cash. Effectively, once an entity intentionally makes or accepts a payment, the entity commits the offence if the payment includes cash of an amount equal to or in excess of the cash payment limit. This applies whether or not the entity was aware that the payment included this amount of cash. [Subclauses 12(2) and (4) of the Bill]

1.44               Consistent with other cases to which strict liability applies, the defence of mistake of fact is available in relation to these elements. If an entity can demonstrate, after consideration, that it mistakenly but reasonably believed that a payment did not include an amount of cash that was equal to or exceeded the cash payment limit then they will have not committed the offence.

1.45               The application of strict liability to these elements of the offences is necessary for the offence to have its intended effect of deterring the use of large cash payments and ensuring businesses take action to establish systems and other process to prevent breaches of the cash payment limit. Payments are often routine or automated and can often be made or accepted without particular consideration, which can make demonstrating any level of intention problematic. Applying strict liability to making or accepting a cash payment effectively places a duty on entities to take reasonable steps to ensure they do not make or accept such a payment, which is necessary for the cash payment limit to be effective.

Geographic application

1.46               Both strict liability offences are subject to category B extended geographical jurisdiction. Broadly, under standard geographical jurisdiction, an offence will not apply unless either conduct or a result of the conduct constituting the offence occurs in Australia or on board an Australian aircraft or ship, or the offence is ancillary to another offence for which that was the case. Under category B extended geographical jurisdiction, the offences will also apply if the entity is an Australian citizen or body corporate, or, a resident of Australia provided that the offence is also contrary to the law of the jurisdiction in which it is committed by the resident. [Subclause 12(6) of the Bill]

1.47               However, this Bill provides category B jurisdiction only applies to an offence if the payment or series of payments that constitute the offence is wholly or partly for a supply and the supply is made wholly or partly in Australia. [Subclause 12(6) of the Bill]

1.48               In most cases, the offence will apply appropriately under standard geographical jurisdiction, as either the payment or the results of the payment (the supply) will occur in Australia. However, the extension ensures that entities that are closely linked to Australia cannot escape the application of the cash payment limit in relation to supplies occurring in Australia by arranging for payment to take place outside of Australia.

1.49               In this context, ‘Australia’ and ‘resident of Australia’ have their ordinary meaning under the Criminal Code. This means ‘Australia’ includes the external Territories and ‘resident of Australia’ means a person who resides in Australia within the ordinary meaning of those words. Any special definitions of Australia and resident that apply in other statutory contexts, such as the income tax law, do not apply for these purposes.

Penalty

1.50               The maximum penalty for both strict liability offences is a fine of 60 penalty units. This reflects the potential seriousness of the conduct and the importance of deterrence while also being consistent with the guidelines for strict liability offences set out in the Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers . [1] [Subclauses 12(1) and (3) of the Bill]

1.51               However, under section 4B of the Crimes Act 1914 , the maximum penalty for a corporation is increased to five times the amount for a natural person. The maximum penalty for this offence for a body corporate would therefore be 300 penalty units.

Mental element offences

1.52               The remaining two offences apply in the same circumstances as are set out above and all of the physical elements of the offences are the same. However, the strict liability is not the fault element for any of the physical elements of these offences. Instead the fault element for the circumstances of the payment including cash and the total value of the cash included is the standard fault element for circumstances under the Criminal Code: recklessness. [Clause 13 of the Bill]

1.53               This means that an entity will only commit these offences if, in addition to satisfying the requirements for the strict liability offences, the entity knew that there was at least a real risk that the payment would result in the total amount of cash paid or received equalling or exceeding the cash payment limit.

1.54               The maximum penalty for these offences is also greater - 120 penalty units or 2 years imprisonment or both. [Subclauses 13(1) and (2) of the Bill]

1.55               This higher penalty reflects the greater level of culpability involved in deliberately or recklessly breaching the cash payment limit. Unlike the strict liability offences, which operate to ensure compliance with the limit, the recklessness offences apply to penalise entities that have consciously and deliberately decided to risk violating the cash payment limit.

1.56               Both mental element offences are also subject to category B extended geographical jurisdiction in circumstances where a payment is made for supplies occurring in Australia for the reasons outlined in paragraphs 1.46 and 1.49. [Subclause 11(4) of the Bill]

Defences

1.57               All of the offences provide that the offence does not apply to a payment if the payment is one that the Treasurer has specified in the rules. The offences also do not apply to payments that are made or accepted in circumstances specified by the Treasurer in the rules. [Subclauses 12(5) and 13(3) of the Bill]

1.58               It is expected that exceptions will be created for payments in transactions in which neither party is acting in the course of a business or other enterprise and certain payments that are subject to reporting obligations under the AML/CTF Act.

1.59               Allowing kinds of transactions to be made exempt from the cash payment limit by legislative instrument ensures that there is flexibility in the regulatory regime to accommodate new kinds of transactions. Given the serious nature of the proposed offences and the breadth of the activities to which they can apply, it is important to ensure that swift changes can be made to accommodate new kinds of transactions in which the use of cash is necessary or appropriate.

1.60               Given the importance of speed, the need to minimise the risk of any unintended economic disruptions and the fact that the power can only be exercised to limit the scope of the offences, it was considered appropriate that the power be exercised by rules made by the Treasurer rather than by regulation.

1.61               Any rules are subject to the full process of Parliamentary scrutiny including disallowance as set out in the Legislation Act 2003 .

1.62               This Bill permits the Treasurer to either exempt a payment in its entirety or instead to exempt only the making or accepting of a payment in particular circumstances. This reflects that there are classes of payment that it may be appropriate to wholly exempt (such as payment occurring outside the course of an enterprise) and cases where it may be appropriate to exempt one party but not the other based on their particular circumstances. For example, if one party is misled by the other party into believing that a payment was not accepted in the course of an enterprise, it may well be appropriate to exempt the party that was misled but not the other party.

1.63               A defendant bears an evidential burden to establish the possibility that their use of cash of an amount equal to or above the cash payment limit relates to a payment of a kind specified by the Treasurer or that was made or accepted in circumstances specified by the Treasurer.

1.64               The defendant, as one of the parties to the transaction, is readily able to assess the nature of the transaction because the details of the transaction are peculiarly within the knowledge of the parties. This is particularly the case because the relevant payments will involve cash, which may well result in no records of the transaction being recorded outside of those created by the parties. In contrast, law enforcement agencies would be likely to find it difficult or impossible to prove the nature of the payment should the parties to the transaction choose to withhold information because of the limited information created in relation to cash payments.

1.65               The general defences set out in Part 2.3 of the Criminal Code can also apply to the cash payment limit offences.

Entities

1.66               The offences apply to all entities. ‘Entity’ is defined in the same way as in the ITAA 1997. It includes both legal persons, such as individuals, bodies corporate and bodies politic, as well as certain associations, structures and arrangements, such as partnerships, trusts, unincorporated associations, superannuation funds and approved deposit funds. These are the structures through which Australians traditionally conduct business and to which tax and other regulatory obligations apply. [Clauses 12 and 13 and the definition of entity in clause 7 of the Bill]

Determining the criminal responsibility of entities that are not legal persons

1.67               This Bill provides that, in working out if an entity that is not a legal person has committed an offence established by the Bill, the rules in Division 12 of the Criminal Code for determining corporate criminal liability apply to an entity as is it were a body corporate. [Subclause 15(1) of the Bill]

1.68               Broadly, this means that an entity that is not a legal person will commit the physical element of an offence if is committed by an employee, agent or officer of the entity acting with the actual or apparent scope of their employment or authority.

1.69               For this purpose, an entity (the first entity) is taken to be an agent, employee or officer of another entity acting within their actual or apparent authority if the first entity is acting on behalf of the other entity or is carrying on activities that are such that a reasonable person would consider that the first entity would be an agent, employee or officer of the second entity were that entity a body corporate, and the activities are similar to the activities that would be carried on by of an agent, employee or officer of a body corporate. [Subclause 15(2) of the Bill]

1.70               Under Division 12 of the Criminal Code, a fault element other than negligence relating to a physical element will be attributable to a body corporate if that entity has authorised or permitted the commission of the offence. This authorisation may be implied or tacit as well as express. One manner in which such authorisation may be given is through the actions of the body or entity exercising the executive authority of the entity.

1.71               A fault element of negligence is attributable to a body corporate in the same way it applies to individuals. Negligence may arise even where none of the individuals involved in the offence were individually negligent, if the conduct of the entity was negligent when viewed as a whole.

1.72               As a result of this Bill, these rules for determining whether a body corporate satisfies the fault element of an offence will apply to entities other than individuals and bodies corporate for the purpose of the offences in this Bill. This will mean that fault elements other than negligence are attributable to such an entity if the entity authorised or permitted the commissioner of the offence, while a fault element of negligence is determined consistent with the rules for individuals.

1.73               The approach is modelled on the approach taken in other Commonwealth legislation such as Division 444 in Schedule 1 to the Taxation Administration Act 1953 and sections 237 to 239 of the AML/CTF Act. However, unlike those rules that relate to a wide range of obligations, the provisions in this Bill only deal with liability for offences.

1.74               The provisions ensure that the offences can be applied effectively to entities that violate the cash payment limit, however they are structured. Without these rules it would be difficult or impossible to hold these controlling entities to account for actions that are ultimately under their control.

Liability of other entities for offences committed by an entity that is not a legal person

1.75               To the extent an entity is not a legal person, they cannot be the subject of legal proceedings. To address this, the Bill provides that if an offence is committed by an entity that is not a legal person, another entity or entities (being broadly the entity that has control over the actions of the first entity), will be taken to commit that offence. [Clause 16 of the Bill]

1.76               The table below sets which entity is taken to commit an offence when the offence is committed by a particular type of entity.

If an offence is committed by an entity that is …

…the offence is taken to have been committed by…

an unincorporated association or body

each member of its committee of management.

a partnership

each of the partners.

a trust

the trustee of the trust, or, if the trust has more than one trustee, by each of the trustees.

a superannuation fund

the trustee of the fund, or, if the fund has more than one trustee, by each of the trustees.

However, if a fund does not have a trustee, the offence is taken to have been committed by the entity or entities that manage the fund.

[the table in subclause 16(1) of the Bill]

1.77               These provisions are consistent with the equivalent provisions that apply under Division 444 in Schedule 1 to the Taxation Administration Act 1953 .

1.78               A defence is available for a person that is taken to commit an offence because of this provision. The offence does not apply to a person if the person can demonstrate that they were not in any way involved in the commission of the offence. [Subclause 16(2) of the Bill]

1.79               Involvement can either be:

•        aiding, abetting, counselling or procuring the offence; or

•        being knowingly concerned in or party to any act or omission.

1.80               Effectively, this ensures that a person who was in a position to have control over the actions of an entity, but neither knew nor was involved in the commission of a criminal offence by that entity will not be guilty of an offence.

1.81               Structuring this provision as a defence is appropriate as it is based on the knowledge and state of mind of the defendant, which is peculiarly within the knowledge of the defendant and would be difficult or impossible for the prosecution to ascertain.

1.82               This Bill also provides that, when sentencing a legal person who has been convicted of an offence under this Bill, if the person was taken to commit the offence because of the actions of another entity that is not a legal person, the court may take into account the financial circumstances of that other entity, and any fine may be recovered from the assets of that entity. [Clause 17 of the Bill]

1.83               This ensures that the courts can ensure that any penalty appropriately punishes the entity that has directly committed the offence. It also ensures that the entity that committed the offence cannot escape a penalty through altering its management arrangements (for example, a fine will still be enforceable against the assets of a trust even if the trustee is a corporate trustee that does not seek to be indemnified).

1.84               For avoidance of doubt, this Bill makes clear that the fact that the financial circumstances of an entity cannot be determined should not prevent the imposition of a fine on a person. This Bill also makes clear that these provisions also do not affect the general rule set out in subsection 16C(1) of the Crimes Act 1914 that the severity of the sentence for any federal offence must be appropriate in all of the circumstances of the offence. [Subclauses 17(4) and (5) of the Bill]

Additional constitutional operation

1.85               This Bill relies upon the powers of Parliament to legislate in relation to, among other matters, taxation, the currency power and the communications power set out in (see paragraphs 51(ii), (v) and (xii) of the Constitution ). [Clause 19 of the Bill]

Rule making power

1.86               This Bill provides the Treasurer with a power to make rules to prescribe matters where this is permitted by the Bill, as well as to prescribe other minor or ancillary matters that are necessary or convenient for giving effect to the Bill. [Clause 20 of the Bill]

1.87               In the context of this Bill, rules can be made to prescribe exemptions from the cash payment limit offences (see paragraphs 1.57 to 1.64) and to specify how to determine the value of payments in Australian currency (see paragraphs 1.32 to 1.33). The rationale for why these matters are dealt with in rules is set out in paragraphs 1.64 and 1.33.

1.88               Consistent with usual drafting practice and for the avoidance of doubt, the rule making power is expressly excluded from being able to alter matters dealt with in this Bill or do things that should be provided for in primary legislation, such as create new offences or impose a tax.

1.89               Rules made under this power are a legislative instrument and are subject to tabling, disallowance and all of the other requirements set out in the Legislation Act 2003 .

Guide materials and general provisions

1.90               This Bill includes provisions establishing the structure and object of the legislation and also sets out appropriate guidance materials for the new offences and related provisions. [Clauses 1, 3, 4, 7, 11 and 14 of the Bill]

Application and transitional provisions

1.91               The cash payment limit applies from 1 January 2020. [Clause 2 of the Bill]

1.92               This means that the offences that give effect to the limit apply to conduct occurring on or after that day.

1.93               The offences do not apply to conduct that occurs before that time. However, if a payment or series of payments is made after that time, it is not a defence to the new offences that the payment or payments may have been made under an agreement made before that time.

1.94               Further, if a payment is made as part of a series of payments, then the new offence can apply even if some of the previous payments in the series occurred before 1 January 2020. This is the case even if the total value of the cash provided in the series of payments only exceeds the cash payment limit because of cash included in payments made before 1 January 2020.

1.95               This Bill also provides that, except in the event of express inconsistency, it does not exclude or limit the operation of any other law of the Commonwealth, a State or a Territory. [Clause 17 of the Bill]

1.96               This makes clear that the passage of this law is not intended to affect the operation of other laws that may regulate or restrict the use of cash or other payment methods.



Chapter 2          

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Currency (Restrictions on the Use of Cash) Bill 2019

2.1                   This Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 .

Overview

2.2                   This Bill introduces offences for entities that make or accept cash payments of $10,000 or more.

2.3                   These offences protect the integrity of the taxation law and other Commonwealth laws by ensuring that entities cannot avoid scrutiny and facilitate their participation in the black economy by making large payments in cash.

Human rights implications

2.4                   This Bill engages with the following rights and freedoms:

•        right to the presumption of innocence under Article 14(2) of the International Covenant on Civil and Political Rights (ICCPR); and

•        the right to privacy and reputation under Article 17 of the ICCPR.

Presumption of innocence - strict liability

2.5                   This Bill engages the right to the presumption of innocence under Article 14(2) of the ICCPR by introducing new offences with strict liability elements relating to the inclusion of an amount of cash in payments an entity makes or accepts.

2.6                   Article 14(2) of the ICCPR protects the right to be presumed to be innocent until proven guilty according to law.

2.7                   Strict liability offences engage with this right as they involve the imposition of criminal liability without requiring the proof of a mental fault element, though a defence of honest and reasonable mistake of fact may be raised. However, strict liability offences are compatible with the presumption of innocence if they are reasonable, necessary and proportionate in pursuit of a legitimate objective.

2.8                   In the case of the offences introduced in this Bill, the application of strict liability to these elements of the offences is required for the offence to have its intended effect of deterring the use of large cash payments. Payments are often routine or automated and can often be made or accepted without active consideration, which can make demonstrating any level of intention problematic. Requiring proof of fault in relation to the amount of cash paid or accepted would significantly undermine the deterrent effect of the provisions because it would allow carelessness or indifference to provide a defence to liability. Applying strict liability to making or accepting a cash payment effectively places a duty on entities to ensure they design systems to ensure they do not make or accept such a payment, which is necessary for the ban to be effective.

2.9                   Given the ubiquitous nature of electronic payments and the large sums involved, this obligation is a reasonable and proportionate means of achieving the legitimate objective of preventing the use of cash by entities to avoid creating records of large transactions and facilitate illicit activities.

Presumption of innocence - liability of controllers of entities

2.10               This Bill also engages the presumption of innocence by providing that entities that are, broadly, in control of an entity that is not a legal person, such as a trust, will be responsible should the entity commit one of the offences set out in this Bill.

2.11               The table below sets which entity is taken to commit an offence when the offence is committed by a particular type of entity.

If an offence is committed by an entity that is …

…the offence is taken to have been committed by…

an unincorporated association or body

each member of its committee of management.

a partnership

each of the partners.

a trust

the trustee of the trust, or, if the trust has more than one trustee, by each of the trustees.

a superannuation fund

the trustee of the fund, or, if the fund has more than one trustee, by each of the trustees.

However, if a fund does not have a trustee, the offence is taken to have been committed by the entity or entities that manage the fund.

2.12               It is a defence for a person that is taken to commit an offence because of this provision to demonstrate that the person was not in any way involved in the commission of the offence by the entity.

2.13               This approach is consistent with the approach taken in other Commonwealth legislation such as Division 444 in Schedule 1 to the Taxation Administration Act 1953 and sections 237 to 239 of the AML/CTF Act.

2.14               It is also reasonable, necessary and proportionate means of pursuing of the legitimate objective of preventing the use of cash by entities to avoid creating records of large transactions and facilitate illicit activities. The provisions ensure that the offences can be applied effectively to the controllers of entities that violate the cash payment limit. Without these rules it would be difficult or impossible to hold these controlling entities to account for actions that are ultimately under their control.

2.15               At the same time, the defence protects entities that may be in a position of control but had no involvement in or knowledge of the wrongdoing.

Prohibition against unlawful or arbitrary interference with privacy

2.16               This Bill also indirectly engages with the right to privacy set out in Article 17 of the ICCPR as the purpose of the offences it creates are to prevent the use of cash to avoid the creation of records of significant transactions.

2.17               Article 17 of the ICCPR provides that individuals shall not be subject to unlawful or arbitrary interference with their privacy, home family or correspondence.

2.18               Lawful interference with the right to privacy is permitted under Article 17 of the ICCPR, provided it is not arbitrary. In order for an interference with the right to privacy to be permissible, the interference must be authorised by law, be for a reason consistent with the ICCPR and be reasonable in the particular circumstances. The United Nations Human Rights Committee has interpreted the requirement of ‘reasonableness’ to imply that any interference with privacy must be proportional to the end sought and be necessary in the circumstances.

2.19               To the extent that the measures in this Bill indirectly impact the rights protected under Article 17 of the ICCPR, these limitations are not arbitrary, and are reasonable, necessary and proportionate to the achievement of legitimate objectives.

2.20               As identified in the Final Report of the Black Economy Taskforce, the use of cash to facilitate the avoidance of reporting and other obligations comes at a significant cost to Government, legitimate businesses and the broader community.

2.21               Restricting the use of cash in transactions is a reasonable and proportionate means of addressing this broader public interest that is necessary in light of the substantial costs to Australia of the black economy activity facilitated by large cash payments, noting that the restriction is limited to payments in excess of $10,000.

Conclusion

2.22               This Bill is compatible with human rights as while it engages the right to the presumption of innocence and the right to privacy, the measures it contains are consistent with those rights.

 




[1] (2011) Criminal Justice Division of the Attorney General’s Department, available at https://www.ag.gov.au/Publications/Pages/GuidetoFramingCommonwealthOffencesInfringementNoticesandEnforcementPowers.aspx .