Future of A$100 Note Under Scrutiny

Australia looks set to follow in the footsteps of India and Venezuela by abolishing the country’s highest-denomination banknote in a bid to crack down on “black economy”.

Speaking to ABC radio on Wednesday, Revenue and Financial Services Minister Kelly O’Dwyer flagged a review of the $100 note and cash payments over certain limits as the government looks to recoup billions in unpaid tax, news.com reported.

Monday’s midyear budget update will include the appointment of former KPMG global chairman Michael Andrew to oversee a black economy taskforce. The black economy accounts for 1.5% of GDP, given many cash payments are untaxed.

O’Dwyer told the ABC not only is the lost revenue owed to the Australian people for schools and hospitals, but it’s also critical for those who do the right thing and pay tax.

“The whole point of this crackdown on the black economy is to make sure we close down any potential loopholes,” she said. Despite the broad use of electronic forms of payment, O’Dwyer warned there are three times as many $100 notes in circulation than $5 notes. “It does beg the question, ‘Why?’” she said.

There are currently 300 million $100 notes in circulation, and 92% of all currency by value is in $50 and $100 notes.

The minister would not rule out the removal of the $100 note, saying it was up to the expert panel to provide recommendations. “There’s nothing wrong with cash per se, the issue is when people don’t declare it and when they don’t pay tax on it,” she said.

The taskforce will draw on the experience of countries like France, where the government banned cash payments of more than €1,000 ($1,062.7). “I’m not going to put a limit on what the taskforce will look at,” O’Dwyer said.

The move comes after a report by UBS, Swiss global financial services company, recommended Australia scrap the $100 note.

According to UBS, benefits may include “reduced crime (difficult to monetize), increased tax revenue (fewer cash transactions) and reduced welfare fraud (claiming welfare while earning or hoarding cash)”.

India last month demonetized the country’s two highest-denomination banknotes in a bid to crack down on “black money”, sparking chaotic scenes.

Prime Minister Narendra Modi sent shockwaves through the country by announcing on November 8 all 500 rupee ($10) and 1,000 rupee ($20) notes—some 85% of all bills in circulation—would cease to be legal tender within hours.

This week, Venezuela joined suit, with Venezuelans rushing to trade in their 100-bolivar bills after President Nicolas Maduro said he was eliminating the nation’s highest currency denomination in an attempt to fight speculation and currency hoarding.