Skip to content

The black economy……putting the nation in the red

Have you ever wondered how much the Australian government owes? According to the Australian Debt Clock it’s around $710 billion and counting. We all like having a go at our politicians for taking advantage of perks but has cheating the tax man by cash-only payments and not declaring them actually become “a national sport” as the Board of Tax chairman, Mr Andrew has suggested. The Federal Government is planning to crack down on tax dodgers in their next budget in May; this will see a claw back of $15 billion in unpaid taxes and bogus welfare payments.

Maybe the next time we complain about education, transportation or health we need to ask, who’s cheating the system without giving back to our society? It appears to be small business and sole traders, not declaring they have any employees. The construction industry, childcare, cafes and restaurants, hair and beauty and hospitality seem to be the big culprits of the cash economy as well as people being overpaid by cheating on welfare benefits.

Whilst the system exploits vulnerable workers such as students and temporary visa holders by businesses paying them cash and often less than award rates, it is also argued that clamping down on the cash economy will hurt those most in need in our community. Many workers say they rely on illegal cash payments just to get by.

Businesses do it to save on tax themselves and don’t pay workcover. Meaning if you are working and an incident occurs you are not covered for an injury or illness.

It’s difficult and costly to identify who is working outside the tax system and it includes those engaged in organised crime and illegal goods. Considering there are three times as many $100 notes in circulation than $5 dollar notes we truly need to question the extent of this problem.

What’s the solution and is there any way we can turn around attitudes of people deliberately rorting the system?

There are obviously sanctions for those involved in illegal activity but we may need positive incentives as well, particularly for those challenged with comprehending regulations. Education programs helping the public better understand their tax obligations and clearer understanding of laws may assist with any confusion. Not everyone in the cash economy is outright cheating, some are simply confused by the system, others of course are outright tax dodgers who don’t care.

With this in mind, I think it will take a while before we become a cashless society; there is $15 billion in lost tax revenue due to fraud and dishonest practices. We may need to ban cash payments like they have done in France. As from last September France has limited cash payments of more than 1,000 euros and a cap of 10,000 euros for visitors. This has assisted them in combatting against money laundering, tax evasion and against financing of terrorism.

None of us want to pay more tax but any fair minded, honest Australian would contribute their part. Remember that if you don’t claim tax when you go to apply for a loan your taxable income is considered and the lender will want proof. In other words, if you apply for a home loan and are only declaring $50,000pa as income, but you are making $100,000 this can be a hindrance to getting into the property market. Please consult your accountant for further clarification. Our financial advisers and mortgage brokers can assist you in creating a financial plan that is both ethical and successful.

Secure your financial future today!