A review of the submissions to the Treasury
The Australian Government has announced its intention to phase out the cheque system by 2030. The Treasury’s staged plan proposes to cease the issuance of bank cheques by 2025, commercial and government cheques by 2026, and personal cheques by 2027, with complete system closure by 2030. Some banks have announced that they intend to move faster than this proposed timeframe to phase out cheques.
For businesses that rely on cheques to make high value payments and high volume payments, the transition is more than just an administrative update.
Why are cheques being phased out?
The transition away from cheques is being primarily driven by the banking industry. The industry has reported a sharp decline in the usage of cheques. This is making it increasingly inefficient and costly to maintain the cheque system.
For example, the submission from NAB reported a 68% drop in cheque volumes between 2018 and 2023 from 9.3 million to just 3 million transactions by approximately 163,000 personal, business and corporate customers. Industry-wide, the Australian Banking Association has stated that over 99% of payments are now digital, while cheques account for a mere 0.1% of non-cash transactions nationally.
The result is an increasingly unviable and costly infrastructure that benefits a shrinking minority of users. The banking industry is therefore calling for the phasing out cheques.
The challenges of replacing cheques for business
Cheques have long offered a unique combination of benefits: they enable payments without requiring they recipient banking details, they are relatively secure, and they can be physically delivered in a traceable manner. As a result, the phasing out cheques poses challenges for business in two key situations: high volume payments and high value payments.
High volume payments
Companies which use high volume payments often rely on cheques to transfer money quickly and securely, particularly where the recipient’s banking details are unknown.
Entities like Optus, the Insurance Council and ComputerShare noted in their submissions that cheques remain their preferred method when paying large volumes of customers with outdated or missing bank details. The alternative—manual validation of bank transfers—is resource-intensive and exposes organisations to fraud/scam risks.
Likewise, the ATO flagged concerns that digital payments, particularly international transfers or those made without current bank account details, can significantly increase costs and fraud risks. Cheques, while slower, provide traceability and can be cancelled if fraud is suspected—a benefit not mirrored in current digital payment platforms.
High value payments
Commercial parties often rely on cheques (particularly bank cheques) to facilitate high value transactions, such as the sale/purchase of land or businesses. By exchanging a cheque for title documents, neither party ever holds both the money and the title documents at the same time. This helps manage legal and commercial risk.
While electronic settlement solutions like PEXA address this concern for real property in jurisdictions such as New South Wales, there is currently no equivalent system for other large-scale transactions, for example sale of a business or high-value personal property (e.g. plant and equipment). The Law Council of Australia’s submission highlights this gap, noting that lawyers are often relied upon to facilitate these exchanges via trust accounts. However, this workaround may be compromised by the upcoming implementation of Tranche 2 of the Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) regime in 2026. The AML/CTF regime will introduce new obligations likely to reduce the efficiency and flexibility of the use of trust accounts in such transactions.
Are there any solutions for business?
Not yet. The Treasury consultation focused on solutions for individual cheque users, such as Bank@Post, and legislative reform. The consultation otherwise left to industry much of the implementation for business.
The submissions suggest that one key solution for business is the adaption of the New Payment Platform. The New Payment Platform was launched in February 2018 to enable fast payments in Australia. The New Payment Platform has facilitated developments in banking such as Osko (near instant payments) and PayID (payments linked to details other than bank accounts). The New Payment Platform could be further adapted to meet the needs of businesses with high volume payments or high value payments, but no practical solution is readily available at this time.
In the interim, business can proactively manage the risk posed by the winding down of the cheque system now by:
- reviewing and updating payment processes to both:
- move away from cheques to alternative payment methods wherever possible; and
- ensure recipient bank details are accurately recorded and kept up to date;
- investing in secure digital platforms, such as BPAY, PayID or other name-verified solutions; and
- reviewing and updating fraud/scam prevention protocols.
Key takeaway
The consensus across submissions is clear: while the end of cheques is inevitable. Businesses that delay adaptation risk operational disruption.
If you would like to discuss this article with us, please contact David Greenberg, partner, or Victoria Caldwell, Senior Associate on (02) 9261 5900.