The Clamp Down on 'Black Market' Trading using cash
Following a successful trial that has collected over $110 million in fines and non reported tax, the Australian Tax Office is expanding its recent efforts to expunge 'black market' trading. Black market trading in this sense refers to money earned by a business in primarily through cash trades and transactions which have not been reported to the government at tax time, sometimes by accident and sometimes by design.
In terms of how much impact this will have on tax revenue the Australian Bureau of Statistics estimates that the black market costs $22.5 billion a year which generally hurts those paying taxes the most. I like to think that having things like a good education system to not be surrounded by dumbies is a good incentive for tax to be paid, but we appreciate that there are many factors which result in the black market and some of them can even occur due to lack of understanding around what tax to pay or record keeping.
While the ATO is targeting particular industries that trade more often in cash, such as trades, restaurants and cleaning, the net has been cast broadly, and financially the risk itself is hoped to deter in itself before they may have to pull up records from say four years ago and have to issue fines.
Within this crack down the ATO also is encountering and keeping an open eye for some other activities or lack there of. This namely is that minimum wage is being met and super is being paid where appropriate.
Now often we understand that some may point fingers at particular communities, however there are many factors outside of the ATO that influence this. These range from cultural values of minimum wage being spread, which often are strengthened by cross cultural friendships both ethnically and socioeconomically, to selecting a qualified accountant that does understand the legal requirements around your tax rather than cutting corners. In Brisbane for social cohesion and settlement we have many groups such as the Multicultural Development Authority that help in bridging these barriers to understanding for migrants, and in terms of trade communities whom were a focus in the crackdown improved record keeping is an emphasis.
Accounting software such as Xero can help you keep accurate records that will be saved digitally. This record keeping will assist in ensuring you are reporting to your legal obligations around taxation, as well as offer more efficiency if you are audited. If you have a giant box sitting at home of transactions you can imagine the mess and pain come an audit which can be avoided by good records. This isn't to say that sometimes an excel sheet isn't effective enough when you have a small business so it will come down to personal situation and general ability to keep things neat autonomously without a guiding software.
The takeout messages from this:
- Having a good accountant nearby can help you report accurately to avoid fines and jail time;
- Bridging capital (friendship between people of differing backgrounds) can help avoid people being trapped in below min wage employment and understand alternatives with confidence and ultimately offer more people the classic Australian 'fair go'
- If you are working in cash at this particular moment it has become more important to ensure your records are accurate
- Accounting software or at least an excel sheet and good record keeping can assist you in completing an accurate taxation report to the ATO as well as put a smile on our faces when we open the file to begin your required accounting services.