Ruqayyah Snyder
Australia has not banned cash, but its use is declining rapidly. In 2007, 69% of transactions were made using cash, but by 2022, this had dropped to 13%. Cards are now the dominant means of exchanging money, and direct transfers are also becoming more common. In 2020, the Australian government attempted to introduce a law banning cash payments over $10,000 to reduce criminal activity, but this was never implemented. While some businesses, particularly small cafes, no longer accept cash, others are legally required to do so. The Australian government has mandated that businesses selling essential goods and services must accept cash payments from 2026.
| Characteristics | Values |
|---|---|
| Cash ban in Australia | No, but cash usage is declining rapidly |
| Cash usage in 2007 | 69% of transactions |
| Cash usage in 2019 | 27% of transactions |
| Cash usage in 2022 | 13% of transactions |
| Reason for decline in cash usage | COVID-19, increased use of digital payments, and higher costs of cash transactions |
| Digital payment methods | Cards, direct transfers, tap-card technology, smartphone payment apps, digital wallets, buy now pay later services, in-app payments, digital providers of international money transfers, New Payments Platform |
| Businesses refusing to accept cash | Allowed by law, many small businesses no longer accept cash |
| Government intervention | The Australian government will mandate that businesses selling essential goods and services must accept cash from 2026 |
| Ban on cash transactions over AUD 10,000 | Proposed in 2020 to prevent money laundering and terrorism financing, but the bill is still under review |
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What You'll Learn
Cash payments over $10,000 AUD banned to prevent crime
Australia has been moving towards becoming a cashless society, with cards and direct transfers being the dominant means of exchanging money. In 2020, the Australian government announced its intention to ban cash payments over AUD 10,000 to prevent crime and tax evasion. This law, known as the Currency (Restrictions on the Use of Cash) Bill 2019, was meant to come into force on January 1, 2020, but faced delays and scrutiny from a Senate committee.
The proposed ban on cash transactions over AUD 10,000 is part of the government's efforts to tackle the black economy and enhance tax compliance. It builds upon existing restrictions on cash payments and reporting requirements under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act). The AML/CTF Act mandates that businesses providing certain "high-risk" services must report cash payments of AUD 10,000 or more, and individuals entering or departing Australia must declare amounts of physical currency exceeding this threshold.
The rationale behind the ban is to make it more difficult for criminals to conduct illicit activities involving large sums of money. By restricting cash payments, authorities can better track financial transactions and identify potential illegal activities, such as money laundering or tax evasion. This measure is expected to improve tax compliance and reduce criminal activities that rely on large cash transactions.
While the ban aims to prevent crime, there are concerns about its potential impact on legitimate businesses and individuals who rely on cash. Some businesses, especially small ones, may face challenges in adapting to cashless operations, and there are privacy and security considerations for those who prefer using cash. Additionally, the ban does not address digital currencies like Bitcoin, which could potentially be exploited for illegal activities.
As Australia moves towards a cashless society, it is important to ensure that the transition is inclusive and secure for all. The government and financial institutions must provide the necessary infrastructure, education, and incentives to facilitate the adoption of alternative payment methods, especially for traditional cash users and small businesses.
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Cards are the dominant means of exchanging money
Cards are now the dominant means of exchanging money in Australia. In 2007, cash was used for 69% of transactions, but by 2022, this had dropped to 13%. The use of cash has declined across all age groups and for all products, and the COVID-19 pandemic accelerated this shift away from cash towards card and digital payments.
The popularity of tap-card technology and smartphone payment apps shows that Australians are becoming more comfortable with paying without cash. Recent research shows that 71.7% of Australians used some form of digital payments solution, such as PayPal or BPay, in the previous year. The launch of the New Payments Platform (NPP) in 2020 has also allowed households, businesses and government agencies to make transactions easily and immediately, further reducing the need for cash.
The decline in cash usage has been accompanied by a rise in card transactions. Credit and debit cards now account for 77% of transactions. Debit cards overtook cash sometime between 2016 and 2019 and now account for more than half of payments. The use of cards is particularly prominent among younger age groups, with only 27% of over-65s using debit cards in 2022, compared to 52% in 2019.
The shift towards card and digital payments has been driven by technological innovation and increasing competition in the supply of payment services. Cards and digital wallets offer faster and more convenient payment solutions that fit better with busy lifestyles. Additionally, the high cost of processing and transporting cash makes it less attractive for businesses.
While Australia has not completely banned cash, there have been efforts to restrict its use for transactions over AU$10,000 to combat money laundering and terrorism financing. These restrictions, coupled with the increasing popularity of card and digital payments, suggest that Australia could become a largely cashless society within the next decade.
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Cash usage has declined drastically across all age groups
Older consumers, who are more likely to use cash, have also seen a significant decline in cash usage. Between 2019 and 2022, cash usage among those over 65 decreased from 52% of transactions to 27%. Overall, the use of cash for in-person transactions has decreased across all age groups, with only 5% of respondents in a 2022 survey using cash for all in-person transactions, compared to 10% in 2019.
The decline in cash usage is attributed to the increasing popularity of card payments, direct transfers, and mobile payment options. Cards are now the dominant means of exchanging money, with debit cards being used more frequently by younger consumers and credit cards by older consumers. Lower-income households, who typically rely more on cash, have also seen an increase in card usage, with debit cards being used for over half of their transactions.
The shift away from cash is also influenced by the convenience and efficiency of digital payment methods, the rise of ride-sharing and public transport payment cards, and the higher costs associated with processing and transporting cash. While some Australians still prefer cash for privacy and security reasons, the overall trend indicates a move towards a cashless society in Australia, with cash usage expected to continue declining in the coming years.
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Businesses can refuse cash payments for goods and services
In Australia, businesses can refuse cash payments for goods and services. While Australian currency has legal tender status, businesses are not obliged to accept cash as a form of payment. According to the Australian Competition and Consumer Commission (ACCC), businesses can choose which payments they want to accept, whether that is only cash, only card, or a mix of payments.
The ACCC states that "it is legal for a business to specify the terms and conditions that they will supply goods and services. This includes whether they will accept cash payment. However, consumers must be made aware of these terms and conditions before they make a purchase." This means that businesses can refuse cash payments, but they must clearly communicate their policy to customers before they reach the checkout. This can be done by putting up signs at the checkout or at the door to inform customers that cash payments are not accepted.
There are several reasons why a business may choose to refuse cash payments. Firstly, cashless payments can help to minimise costs associated with handling, counting, and banking cash, which can amount to significant staff wages. Additionally, cashless payments can reduce the risk of theft and improve convenience for the business. During the COVID-19 pandemic, many businesses also introduced policies that only accepted contactless payments to maintain hygiene and prevent the spread of germs.
While businesses can refuse cash payments, it is important to consider the customer base and local regulations. Some customers may prefer to use cash, and refusing cash payments may limit the business's potential customer base. Additionally, there are certain industries, such as hairdressers, plumbers, and childminders, where cash payments are still common. Therefore, businesses should weigh the advantages of refusing cash against the potential impact on their customer base.
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The cost of creating, sorting, and transporting cash is high
Cash is expensive to create, sort, and transport. The average cost of creating, sorting, and trucking sheets of plastic and coins exceeds 50 cents per payment, mostly passed on to banks and retailers. This cost is soaring as the number of cash payments plummets. Printing notes is costly, at about 32 cents per note, whether it's worth $5 or $100. The real expense, however, lies in moving notes and coins around, restocking banks and cash registers, and ensuring security.
Businesses often hire third-party armored car services to transport money from place to place, which can be costly. These services assume the risk of the deposit once it's picked up, but businesses are still liable for cash that is stolen or damaged before pickup. Additionally, there are often hidden fees associated with cash transport services, such as fuel charges, mileage fees, and surcharges for holidays. These fees can quickly add up, especially for businesses with multiple locations.
Cash management solutions, such as automated cash counting and sorting, can help to reduce labor costs and improve accuracy and security. However, employing staff to count, sort, and reconcile cash transactions can be time-consuming and expensive. It can also lead to increased payroll expenses and expose businesses to security risks, including theft, robbery, and internal fraud.
The use of cash in Australia has been declining, with cards and digital payment solutions now being the dominant means of exchanging money. As a result, the cost of creating, sorting, and transporting cash is becoming increasingly high relative to the number of transactions, suggesting a potential "death spiral" where higher costs lead to even fewer cash transactions.
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Frequently asked questions
No, but cash usage has been declining in Australia, with cards and direct transfers becoming the dominant means of exchanging money.
The COVID-19 pandemic accelerated the shift towards a cashless society, with consumers and businesses opting for contactless card payments to reduce the risk of virus transmission. Additionally, the increasing popularity of digital payment solutions, such as "tap and go" cards, digital wallets, and online payment platforms, has made it more convenient and faster to transact without cash.
Yes, the Australian government has implemented the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act). Under this Act, businesses providing certain "high-risk" services must report cash payments of AU$10,000 or more. Additionally, individuals entering or departing Australia must declare amounts of physical currency exceeding AU$10,000.
Yes, there is no law against a business refusing to accept cash for goods and services. Businesses have the right to set the commercial terms of payment before entering into a contract for the supply of goods or services.
A cashless society is expected to lead to a more "honest" tax environment, reducing the scope for criminal activities and black economy transactions. Additionally, digital payments offer convenience, speed, and security to consumers and businesses, improving the overall efficiency of the payment system.
