It is more difficult for businesses, big and small, to avoid declaring their takings with more transactions being registered with the bank and therefore the tax office as a result of the move to card payments. With each tap of a card, there is a record of the transaction. The same is not always true with cash.
Merchants using cards must declare and obviously transfer the goods and services tax to the tax office if transactions are registered with the bank. There is no such obligation if the transaction is cash where they not only can keep the cash for the product, but pocket the GST levied on the item in question. It also means that the profit of the business is harder to disguise if the money is merely transfer from a card to the bank account of the business. This may account for part of the increase in company tax collections.
As a result, it appears that a good old tap and go for a hypothetical $9 transaction for a latte and a muffin helps the tax office and the budget and stops the friendly café proprietor slipping a few bank notes into their back pocket at the end of the day.
Data on consumer’s use of cash, cards and transfer for their transactions backs this up.
Data published by the RBA shows that of all consumer transactions undertaken in 2016, around 18 per cent were, by value, in cash. This is down from 38 per cent in 2007. One can only assume that this is even less in 2018. Perhaps more tellingly, is the increasing uses of cards for smaller transactions under $10 which are easy to hide in an era where cash was king.
This automation may also have implications for PAYG income tax compliance. There were anecdotes of casual staff being slipped $100 cash from the till for the day’s shift and this meant less paper work for the business owner and no tax paid by the worker. A win-win for them, but a loss to the tax office.
With less cash in the till and more in the bank account, the benefits from the old arrangement have all but gone. If there happens to be a ‘surplus of cash’ in the bank account from all the taps and direct debits, best to reduce this by paying workers electronically and therefore paying some income tax on the transaction.
It is difficult to know how big an impact this might be, but it is clear the tax office and government are pleased it is happening.
The moral of the story depends on your values, it would seem.
If you hate big government and the tax office, and don’t mind giving small business a helping hand with just a little bending of the law, use cash.
If you want to hurt small business by making them comply with their tax obligation and also see the budget repair accelerated, tap your card.