CBA boss suggests ban on cash payments above $500

Cash payments above $500 should be banned to help curb the shadow economy, according to Commonwealth Bank CEO Matt Comyn, who outlined a bold suite of economic reform suggestions for the federal government at a banking summit on Tuesday.

Speaking at the Australian Financial Review summit, Comyn argued in favour of major changes to the tax system, which he said would help kickstart the nation’s economic growth.

This includes re-configuring the income tax brackets by cutting the income tax rate to 30% for workers earning less than $300,000, as well as increasing the GST to 15% and broadening its base to raise an additional $60 billion a year.

The CBA boss also advocated for scrapping “extremely inefficient” state-based payroll taxes and stamp duties on property and insurance, which he estimated could cost around $55 billion; hitting the tech giants with a levy to generate even more revenue for the government; and doing away with personal income tax deductions, except for charitable donations.

The latter measure would raise $5 billion, while also making tax returns simpler, removing red tape and boosting productivity, he argued.

Cash and the shadow economy

On cash payments, Comyn suggested payments above a threshold of $500 should be prohibited and instead redirected through the electronic payments system.

This would help stem leakage to the shadow economy, he said, and potentially save the government around $5 billion.

However, SmartCompany understands Comyn was not advocating for the change in isolation, but rather as a way to fill revenue gaps that would be created if his suggested reforms to personal income tax were to be adopted.

According to the Australian Taxation Office (ATO), the shadow economy — a term used to describe business activities that fall outside of the tax and regulatory systems — was estimated in 2016 to be worth 3% of GDP, or approximately $50 billion at the time.

In 2018–19, the overall tax gap — the difference between tax collected and the amount that would be collected if every firm was fully compliant with the law — was estimated to be around $33.5 billion, or 7.3%.

The previous federal government was unsuccessful in a bid to ban cash transactions above $10,000, as part of its efforts to tackle the shadow economy, while the introduction of the Director ID scheme is seen as one way of clamping down on illegal business activities.

The Labor government has also continued to fund the ATO’s Shadow Economy Program, which in the October 2022 federal budget was extended for another three years to maintain “a strong and co-ordinated response to target shadow economy activity, protect revenue and level the playing field for those businesses that are following the rules”.

Comyn’s comments come at a time when cash usage in Australia has been in decline — a trend that accelerated during the Covid-19 pandemic when many businesses opted to stop accepting cash.

While thousands of Australians have previously joined social media groups calling for boycotts of businesses that no longer accept cash, research from the Reserve Bank of Australia (RBA) suggests the vast majority of Australian businesses continue to accept physical money.

The same RBA research suggests older Australians prefer to use cash, compared to their younger counterparts, and cash usage remains a major issue in regional Australia, as shown by the Senate committee inquiry into regional bank branch closures.

This has also been highlighted in the concerns around the viability of Australia’s single provider of cash transport services, Linfox Armaguard, which is obliged to continue distributing cash in regional areas under commercial terms with the banks.

According to reports, the four major banks, including Comyn’s Commonwealth Bank, are in discussions with the major grocery retailers about a financial bailout deal for Armaguard, which would allow it to continue cash deliveries until the second half of the year.

SmartCompany has contacted Commonwealth Bank for further comments.