Advancements in technology are forcing cash to gradually become redundant, and the government is in favour of cashing in coins for digital dollars.
There are many valid arguments both for and against a cashless economy (keep reading for details), but ultimately it is the government and the powers that be that will dictate how we transact and trade. In fact, the government announced in the 2017 Budget that they will be cracking down on businesses and individuals who – whether deliberately or accidentally – fail to declare income, dodge tax and neglect employee benefits. This is part of an attempt to claim back a staggering $15 billion in lost federal tax revenue and illegitimate welfare payments.
The vast majority of small business owners are fair and honest. There are however, some that deliberately hide income to avoid paying the right amount of tax or superannuation. One of the ways they do this is by not recording or reporting all their cash income or electronic transactions.
It’s somewhat inevitable that cash will soon become unnecessary
The Australian Tax Office (ATO) uses a range of tools to identify and take action against people and businesses that may not be correctly meeting their obligations. Through data matching, they can identify businesses that don’t have electronic payment facilities. These businesses often advertise as ‘cash only’. The most common offenders in the ATO’s sights are tradesmen and women, cafes and restaurants, beauty therapists and hair salons, and various freelancers.
“A lot of them are innocent parties, but a lot of it is outright cheating as well,” said Board of Tax chairman, Michael Andrew.
One particularly well-known cash only business is ice cream giant, Gelato Messina which boasts 15 stores nationwide all of which are reliant on your physical five’s and ten’s.
“Our cash-only policy originated from the days when cash was the fastest form of transaction and wireless devices weren’t readily available. In addition, our stores don’t have much bench space (all the POS systems are on iPads and our service area is a glass shelf) so there’s no room for credit card machines,” said Declan Lee, co-founder of Gelato Messina.
An industry that also once survived on your spare change – but has since embraced the trend of technology – is busking. Street performers around the world are staying ahead of the curve with an easy and secure way for the public to donate directly through their mobile devices. The BuSK app fills a void where cashless pedestrians are able to tip entertainers on the spot. Not only does the app allow you to contribute money, you can listen to their music, stream their videos and read stories of the best unsigned talent on the planet.
As a small business, why wouldn’t you want to conform to a cashless economy?
- Give your business and your customers options with electronic payments (minimum Eftpos charge or not)
- The government is offering incentives to small businesses that accurately declare full income
- Increase your market through the digital world, consider adding an online aspect to your business such as After Pay or PayPal
- Make things easy for yourself by syncing your electronic payment systems with your bookkeeping software. This will give you greater visibility over your business’ health
- Avoid potential lawsuits and penalties over non-payment of employee entitlements, or allegations of underpayment.
Although electronic payment options are popping up everywhere, it’s important to look at why some small businesses are experiencing inertia:
- If your customer’s phone is also their wallet what happens if they run out of battery?
- If your bank merchant or POS system goes down then you can fall back on cash
- A more serious reason for sticking with the old-school cash system is related to privacy concerns. When using non-cash payment systems such as payWave, PayPal, Apple Pay, After Pay and electronic devices; all spending habits are captured; how much, what was purchased and the location it was purchased at. Financial institutions are able to sell you more credit, marketing companies are able to precisely tailor targeted advertising not only at you but at family members; including your children.
At the end of the day, the idea behind a cashless economy means your transactions are transparent and traceable, and you can be kept accountable for taxes, paying super and making an overarching contribution towards a healthy Australian economy. It also arms the government with an opportunity to claw back a staggering $15 billion in lost federal tax revenue and illegitimate welfare payments due to widespread cash evading activity.
It’s somewhat inevitable that cash will soon become unnecessary so it’s important you and your small business are prepared for this. Understandably, changing a business model requires careful planning, and this is where Thomson Reuters’ Checkpoint platform comes in handy. To find out how to stay connected in the digital age, be across the latest government small business tax breaks, and keep up with your tax and financial obligations, sign up to a FREE trial of Checkpoint.