Have you ever encountered engaging the services of someone who accepts cash wages “off the books”? That’s part of the growing Black Economy in Australia. The black economy refers to businesses or individuals who operate outside the tax and regulatory system or do not appropriately report their tax obligations.
Also known as the shadow economy, cash economy and underground economy, the Black Economy covers various practices such as payment and acceptance of cash wages off the record, sharing economy contractors who don’t declare income, understatement of takings, moonlighting, welfare fraud, and phoenixing activities. Complex interactions with illegal activities, including money laundering, must also be considered.
While it may be advantageous for many contractors, Black Economy participation does a lot more harm than good. First, it threatens the integrity of the tax system of Australia. Likewise, it enforces substantial costs on the economy and society. Black economy activities weaken tax revenue, create an unfair commercial environment that burdens businesses and individuals that do the right thing, lead to the mistreatment of workers, and make way for the abuse of the welfare system.
If nothing is done to restrict it, participating in the Black Economy can result to long-term negative effects. It may promote a culture that supports and normalises under reporting and tax evasion. As revenues decline, businesses and individuals that religiously report their business activities may have to shoulder bigger tax burdens.
In relation to this, the Government of Australia has released a consultation paper by the Black Economy Taskforce outlining 54 additional policy ideas. From this consultation paper, two schedule amendments arose: Electronic Sales Suppression Tools and Third-Party Reporting.
Learn more about the Black Economy and the new legislation that aims to stop it. Watch the Black Economy webinar from Effective PD. To subscribe, visit www.effectivepd.com.au. Effective PD offers an innovative way for busy accountants to be on top of their game with continuing professional development in a brief, flexible and easy way.
