BLACK ECONOMY: The ATO estimates about 1.6 million businesses (mostly micro and small businesses with an annual turnover up to $15 million) operating across 233 industries, are part of the cash economy and not fulfilling their legal obligations.
BLACK ECONOMY: The ATO estimates about 1.6 million businesses (mostly micro and small businesses with an annual turnover up to $15 million) operating across 233 industries, are part of the cash economy and not fulfilling their legal obligations. Supplied

Black economy creates a $40 billion black hole

PAYING cash for goods and services or getting paid cash-in-hand and avoiding tax, has a negative impact on regional communities.

The Australian Tax Office estimates about 1.6 million businesses (mostly micro and small businesses with an annual turnover up to $15 million), operating across 233 industries, are part of the cash economy.

"The top three industries for 'cash transactions' are the building and construction industry; hair and beauty; and restaurants and cafes," the spokesman said.

While getting a few dollars off for paying cash with the transaction not attracting GST might appear to be a good thing, in reality it's an unfair playing field for businesses that adhere to legalities such as paying their workers the correct rates, sick pay and superannuation.

The ATO has been closing the net on people who operate in the black economy and are chasing people who operate entirely outside the tax and regulatory system or who are known to the authorities but do not correctly report their tax obligations.

While the ATO acknowledge it's legal for an employer to pay wages in cash, rather than into a bank account, it said some businesses deliberately use cash transactions to avoid meeting their tax and employee responsibilities.

An ATO spokesman said the organisation wants to help protect the honest businesses, and takes firm action on businesses that persist in engaging in unfair behaviour.

"Where a business feels they are facing unfair competition, they can report their concerns" the spokesman said.

"The ATO uses a range of approaches, including extensive use of third party data, such as financial institution, motor vehicle and property data, to identify likely tax cheats (and) we look into industry-wide patterns, such as the usual expenses and earnings, to help us identify those who are deliberately avoiding their obligations."

The ATO also provide a range of education and assistance to help those at risk of participating in the cash and hidden economy understand and meet their obligations.

"If we contact a business we will always take into account the individual circumstances of the business based upon the records kept and other information," the spokesman said

"If a business is able to provide evidence to support their income, we will generally take no further action."

Employees also need to understand if they are paid cash-in-hand, they need to: be paid (at least) the correct award wages, ensure they don't end up with a large tax bill because the employer hasn't taken tax out and get the benefit of super contributions.

The ATO said the black economy encompasses a wide range of practices, including understatement of takings, the payment and acceptance of cash wages off the books, welfare fraud, sharing economy contractors not declaring their income, moonlighting and phoenixing (where businesses deliberately liquidate to avoid paying employees and creditors).


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