Cash Economy Tempts Taxman Too
We’ve all encountered it and quite a few of us have succumbed to temptation and taken part in it. After all, it’s been around forever, doesn’t hurt anyone, and those who take part afterwards feel they’ve had a small victory.
You know it’s naughty, even illegal. And there is a good chance someone in authority will want to punish you for it. It’s part of the thrill.
We’re talking about the cash economy, aka black, hidden or underground economy.
It’s the tradesman who chops a bit off the bill if you pay in cash saying: “You don’t want a receipt do you?”
There’s the restaurant, café or shop owner who slips a cash payment under the till rather than ring it up.
It’s the gardener, driver and labourer who’s paid cash-in-hand instead of a cheque or electronically transferred into their bank account.
It isn’t only small time workers who take part in the cash economy. Transactions between businesses big and small have known to be paid in briefcases of cash. Not just crooks. Big legit businesses have been caught.
The supposed benefit of the cash economy is that there is no trace for the taxman. No ten per cent GST to be paid. No record for income tax.
It’s booming. The Australia Institute reported recently that five per cent of workers – 575,000 people – are paid cash-in-hand, especially young people.
Government coffers miss out on $5 billion a year. GST alone misses out on $2.7 billion.
Not everyone wants to be part of the cash economy. Some employers force workers to take cash so they are off the books and outside work regulations, including the minimum wage and super. The ATO receives an average 164 tip-offs a week about this. If you’re in this bind it would be wise to seek legal help.
But those who willingly take part in the cash economy should know what they are doing is illegal and there can be harsh consequences. Last year the ATO prosecuted 41 people and nine firms for $3.2 million worth of cash economy offences. A Perth tiler was fined $64,000 for making cash deals.
The ATO sets benchmarks for more than 100 industries to calculate how much income they should be reporting. If a tradesman, small business or micro trader falls short, they’ll want to know why.
If this happens you should seek legal advice as there have been challenges to the benchmarks the ATO uses. But it may be best to beat the taxman to the punch and confess your sins early to reduce the penalty. Go armed with legal and financial advice.