The Turnbull Government’s taskforce on the black economy is expected to release its final recommendations in October 2017. The head of the taskforce, Michael Andrew, has proposed greater scrutiny of lawyers and accountants as part of the effort to combat the cash economy, which is estimated to be worth some $30 billion. The taskforce has examined a number of options for addressing the issue, including a ban on cash transactions exceeding $10,000, providing incentives for companies to shift to non-cash business models, as well as offering an amnesty for cash-only businesses that transition to electronic payments. From The AFR:
The head of the black economy taskforce has accused accountants and lawyers of engineering the loss of billions of dollars in government revenue by helping clients dodge their tax obligations or failing to understand the extent of the avoidance problem.
Former KPMG global chairman Michael Andrew said the taskforce had become aware of advisers who promoted schemes that put their clients’ interests before the law.
“We need to get a lot tougher,” he said. “Tax agents are either assisting their clients make fraudulent claims, or are blind to techniques and systems used in the black economy”…
Mr Andrew… said there would be a greater focus on frontline advisers such as accountants and lawyers…
Some reports suggest that up to 70 per cent of Chinese purchasers of Australian real estate pay in cash, for example.
It is also worth noting that lawyers and accountants (along with realtors) are the real estate gatekeepers that are currently exempted from anti-money laundering (AML) rules, and this exemption has provided an easy avenue for foreign buyers to launder funds through Australian property.
Indeed, Transparency International recently ranked Australia as having the weakest anti-money laundering laws in the Anglosphere, failing all 10 priority areas. This follows the Paris-based Financial Action Taskforce’s 2015 evaluation that Australian homes are a haven for laundered funds, particularly from China, as well as similar warnings from Austrac.
As noted by “Highrise” Harry Triguboff’s yesterday in The AFR regarding Chinese buyers:
“The problem with Australians is they are very slow. They ask their lawyer, they ask their financial adviser, they ask their family, they ask everybody. The Chinese don’t ask anybody, they come off the plane, buy their unit and go.”
While cracking down on cash transactions by lawyers and accountants is a good move, it needs to be accompanied by the implementation of AML rules covering real estate gatekeepers, as was promised by the federal government in 2006.
