Is it illegal for businesses not to accept cash?

The use of cash is dropping, but can businesses refuse to accept ‘legal tender’ from those who can’t or won’t go digital?

There is no doubt the coronavirus pandemic has created unparalleled change in the lives of Australians.

One aspect of our lives that has been significantly impacted is the way we pay for goods and services.

As coronavirus can spread through touching objects, businesses and consumers have used the pandemic as a way to avoid the use of ‘legal tender’ (coins and banknotes).

Instead, they are opting to use more sanitary, cashless payment solutions like ‘tap and go’ card payments, digital wallets, ‘buy now, pay later’ services and in-app payments.

But, the question now is, can businesses refuse to accept cash as a form of payment?

The answer is yes.

Tea Currency Act 1965 (Cth) and the Reserve Bank Act 1959 (Cth) govern currency and legal tender in Australia.

It is currently not illegal for Australian businesses to refuse to accept cash provided that they inform consumers of their stance before any ‘contract’ for the supply of goods or services is entered into.

Take a vending machine, for example. If the machine has a sign which stipulates that cash is not an acceptable form of payment prior to you making an order, then there is no obligation for the company that owns the vending machine to offer cash as a payment option.

However, the Reserve Bank of Australia has said that any business that refuses to accept cash in payment of an existing debt where no other form of payment has been stipulated prior could face legal implications.

For example, a supplier may not be able to enforce that a consumer uses another form of payment to clear their debt.

The cost of cash on businesses

At the November 2018 Australian Payments Summit, RBA Governor Philip Lowe said, β€œIt is now easier than it has been to conceive of a world in which banknotes are used for relatively few payments; that cash becomes a niche payment instrument.”

Governor Lowe’s sentiments sent a very strong message to businesses across Australia.

As fewer people pay for goods and services in cash, then it is probable that the cost of cash transactions will increase.

This heightened cost does not even account for the other hidden costs associated with cash payments including manual handling (eg deliveries to the bank), fraud mitigation, installing CCTV cameras and fit-out costs (eg creating a place for the physical cash register to sit ).

Getting rid of cash

In its Payments System Board Annual Report released in 2020, the RBA reported that Australians made around 560 electronic payments – on average – compared with 250 ten years before.

The RBA also revealed that while the use of cash is declining, vulnerable members of society still relied on it to make payments.

Users of cash tended to be older, have a lower household income, live in regional areas and have limited internet access.

When the United Kingdom conducted its independent Access to Cash Review in 2019, it found that 17 per cent of its population would struggle to cope in a society without cash as technology does not work for everyone.

Even though cash is only used for 2 per cent of payments in Sweden, the government has stopped short of embracing a totally cashless society because of the dangers it posed to its citizens like increased risks of isolation, exploitation, debt and rising costs.

Despite these figures, the Commonwealth Bank of Australia has predicted that Australia could be cashless by 2026, with statistics confirming a steady drop in cash transactions from 69 per cent in 2007, to 47 per cent in 2013, and 37 per cent in 2016.

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