The Turnbull government will use a “black economy taskforce” to find budget savings in the new year, and will consider the future of the $100 note and potential limits on large cash payments as part of the review.
Monday’s mid-year economic and fiscal outlook (MYEFO) will reveal plans for the taskforce, reports Fairfax, and Revenue and Financial Services Minister Kelly O’Dwyer has said the taskforce will look to address the anger that Australians feel when they have to pay more tax because others are paying less.
The taskforce will reportedly be headed up by KPMG’s global chairman Michael Andrew, and its focus will include looking into how individuals and businesses use cash payments and money obtained through the sharing economy to avoid paying tax.
The taskforce will also focus on whether the $100 note still has a place in Australia, as well as considering large cash payments for goods and services, and how cash is used in money laundering across the country.
“I won’t put a specific number on it … but even if you got a reasonable percentage of that, we are talking billions of dollars,” O’Dwyer said in reference to how much revenue could be recouped from a crackdown. The government has put the value of the “hidden economy” at $21 billion, or 1.5% of gross domestic product (GDP).
One possible implication for SMEs would be a crackdown on large cash payments for things like renovation services and home repairs. Board of Tax chief executive Karen Payne told Fairfax this week one policy option could be to introduce compulsory reporting of cash transactions above a certain threshold.
However, Council of Small Business Australia chief executive Peter Strong says that when it comes to cash payments, it’s not just businesses that play a role. Customers and employees can also make their own demands around cash payments, which makes the issue more complicated, he says.
“There’s a few things we’ve got to confront here. If someone comes into our house and gives a painting bid to do a room, someone will say, ‘how about if it’s cash?’” Strong says.
Strong believes, when it comes to policies like enforcing cash payment limits or removing the $100 note, the government should take the best course of action even if not everyone is happy, he says.
“The thing that’d stopped us in the past is that they’ll come up with some reason that it will affect some businesses in a small way, but we’ve got get past the idea that if it’s not perfect, don’t do it,” Strong says.
The federal government has directed a cash economy task force to examine the impact of cash on the collection of revenue several times over the past 20 years. As far back as 2003, experts have observed that when it comes to small businesses interacting with customers and other small businesses and paying in cash, knowledge of the bookkeeping and legal requirements has been spotty at best.
“Businesses in high risk cash economy industries typically display a common range of basic problems: poor record keeping, poor cash flow management practices, inaccurate invoicing procedures, and poor ABN [Australian Business Number] usage practices,” a 2003 cash taskforce report explains.
This time around, the “black economy” inquiry will also look into tax revenue lost through the sharing economy, with more and more workers drawing another stream of income from companies such as Uber or other third-party sharing platforms.
This week the Australian Tax Office indicated it would be conducting a data-matching process in this area, with the tax office saying it will obtain payment records from ride-sharing services like Lyft and Uber to compare details with tax returns they have on record for heightened compliance on tax payments.
Details of the government’s taskforce will be outlined when the MYEFO update is delivered on Monday.