Cash or card?

HIA is participating in the Black Economy Industry Reference Group to work towards a level playing field.

Author

Kristin Brookfield

In the last two decades as cashless transactions have become more common, if not the preferred option for most Australians, it would be easy to think that the cash economy, otherwise known as the black economy, was a thing of the past. Yet this is not the case.

Paying for goods and services in cash today, perhaps more than ever, opens up the potential for a person or business not wanting to pay the GST or other taxes to hide the transaction and avoid payment.

For this reason, in 2017, the federal government undertook a national inquiry into what they call the ‘black economy’. Clearly the main reason to ask questions from the government’s perspective is the potential lost tax. Some reports estimate over $25 billion or 1.5 per cent of Australia’s GDP is occurring in the black economy.

From the industry’s perspective, non-payment of tax disadvantages our members who do the right thing and meet their obligations. HIA participated as a member of the Black Economy Industry Reference Group supporting the taskforce throughout 2017.

While the final report from the taskforce is yet to be publicly released, most recently there were a number of potential changes that may be made to reduce tax avoidance and other illegal activities which were identified during the consultation process.

The 2017 federal budget included two early recommendations from the taskforce. The taxable payment reporting requirements that already apply to building trade contractors will apply to contractors in the courier and cleaning industry from 1 July 2018. Sales suppression software was also banned.

This year’s federal budget is expected to include a number of actions based on the recommendations in the final report. It is possible that the taxable payment reporting system will be further extended to other high-risk sectors, including logistics, security contractors, owner-builders and IT contractors.

There was discussion on the creation of digital identities which could be used to stop identify fraud and seek to better manage company directors, employees and other business obligations.

The way Australian Business Numbers (ABNs) are managed is also on the radar to ensure that any business gaining an ABN uses that given ABN, and to capture fraudulent use of ABNs.

It would be easy to think that the cash economy, otherwise known as the black economy, was a thing of the past

The ‘gig’ economy

The taskforce also focused on what they termed sham contracting arrangements in the emergence of the ‘gig’ economy.

There has been a global explosion of mobile technology platforms that connect people with other individuals who provide services such as transport, food delivery and construction jobs. Businesses use digitally-enabled marketplaces or platforms to pair providers with consumers on a ‘gig by gig’ basis. These businesses have been collectively described as the ‘sharing’ or ‘gig’ economy. Businesses in this sector include Uber, Airtasker and Deliveroo.

These new business platforms primarily operate using cashless transactions. The ‘gig economy’ appears to be creating confusion about the legal distinction between an employee and a genuine independent contractor.

Genuine independent contracting is a quintessential part of the residential building industry. Preserving and enhancing independent contracting has been a focus of HIA’s policy and lobbying efforts for many decades. For residential builders, it provides a flexible, practical and efficient model for engaging workers. Builders rely on access to good and reliable trade contractors to maintain competiveness.

For contractors it is a pathway to business ownership, career flexibility and entrepreneurship. An independent contractor has the ability to choose his or her own hours, clients and manner in which the work is completed. Since they choose their own jobs and clients, the quantity and quality of work (in theory) is better related to the amount of money they make.

There is clearly a difference in the business arrangements used by genuine independent contractors working in the residential building industry and workers in the ‘gig’ economy. Genuine independent contractors charge a customer directly and receive direct payment from that customer. In the ‘gig’ economy, workers generally do not deal directly with the customer and receive payment via a third party.

Recent media attention focused on the treatment of ‘gig’ workers has also raised questions about the economy in which they work.

In the lead-up to this year’s federal budget, HIA will work to ensure that the government does not introduce changes aimed at a very different type of contracting arrangement, which could have an unintended or detrimental impact on contracting arrangements in the housing industry.

Black economy activities include:

• not reporting or underreporting income
• cash-in-hand payment for work
• underpayment of wages
• bypassing visa restrictions and visa fraud
• ABN fraud
• GST fraud.

Owner-builders

As a member of the industry reference group, HIA raised concerns about the manner in which owner-builders operate across Australia and their avoidance of relevant insurances, approvals, and potentially tax payments.

HIA recommended that owner-builders be treated in the same way as residential builders and be required to report all trade contractor payments.

The taskforce supported this suggestion and it is hoped that the final report will include this as a future action by the government.

Copies of the Consultation Papers and Interim Report can be found at www.treasury.gov.au/review/black-economy-taskforce

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