Cash in hand vs tax deduction
- Thread starter Elke
- Start date
The best person to ask is the contractor
With cash on hand, he doesn't need to declare hence he won't be taxed per his income tax rate.
I always go with proper quote, not cash on hand especially with thousands of dollar jobs. You might want to get 2nd and 3rd painter to quote as well.
P.S. I'm not accountant, so I might be wrong
I always go with proper quote, not cash on hand especially with thousands of dollar jobs. You might want to get 2nd and 3rd painter to quote as well.
P.S. I'm not accountant, so I might be wrong
think about it this way,
I always end up arguing with contractors who try and double rip you off by saying, ok 10% off if cash or 20% on top if on the books,
normally, their services are $X+GST
so if they do it cash they dont have to collect gst
the benefit for them is they dont pay tax on it, so lets say 17%-38% depending on their tax bracket,
so essentially they are saving 17-38% on it, so a cash deal with no gst is a screaming good deal for them,
from a buyers perspective (you!) you pay 10% less, but you dont get any deductions, maybe these deductions will come off yoru PAYG salary or the cost base , so it might range from 0%-50%,
so for you to get a 10% discount paying cash, is simply ludicrous, you are essentailly lining the pockets of the contractor unless you dont intend to claim anything
I always end up arguing with contractors who try and double rip you off by saying, ok 10% off if cash or 20% on top if on the books,
normally, their services are $X+GST
so if they do it cash they dont have to collect gst
the benefit for them is they dont pay tax on it, so lets say 17%-38% depending on their tax bracket,
so essentially they are saving 17-38% on it, so a cash deal with no gst is a screaming good deal for them,
from a buyers perspective (you!) you pay 10% less, but you dont get any deductions, maybe these deductions will come off yoru PAYG salary or the cost base , so it might range from 0%-50%,
so for you to get a 10% discount paying cash, is simply ludicrous, you are essentailly lining the pockets of the contractor unless you dont intend to claim anything
for me, it would have to be at a bare minimum the ex gst price PLUS some sort of discount since you are giving him some benefit, you should split this benefit in some way
the other thing is warranty too, if its electrical/plumbing, they wont give you a certificate,
also depends on teh nature of the service, if its soemthign that needs warranty or a certificate, then chances are you wont get it
if its something like mowing lawns, or removign rubbish, then warranty isnt required,
the other thing is warranty too, if its electrical/plumbing, they wont give you a certificate,
also depends on teh nature of the service, if its soemthign that needs warranty or a certificate, then chances are you wont get it
if its something like mowing lawns, or removign rubbish, then warranty isnt required,
Conspiracy to defraud the Commonwealth - Crimes Act. BOTH can be charged. Unlikely but if ATO find evidence you agreed to an arrangement like that its a real threat.
You cant claim the deduction without receipts. Or add to CGT cost base. At a 40% marginal tax rate that's a loss of refund of $1600 for a $4K outlay. And no workers comp cover ? An uninsured job if you have a issue later ?? It also speaks for the honesty of tradie...Dulux $50 or Pascal paint for $15 from Masters ??? Surface prep ???Nah...Cheaper to just paint over dirt. How do you know what corners they will cut. They are dishonest.
For a tradie its a very dumb way to operate. Too often they say everyone does it. Yep and not everyone gets caught. But when they do.....One pissed off client and you end up with an anon tip off to the tax office who do investigate each of these tips. Who come out to audit.
Having supported clients in this position you wont know why or what they are looking for when they audit. It seems so routine. Just a GST review. They are looking for just one unbanked deposit. They wont find it. You now have a problem. If they find undeclared income once it escalates. So they start with further questions. They ask about how you quote etc...They they review EVERY quote for the past six months knocking on doors if they have to. The junior officer gets paid $50K. He hates tax avoiders. They then issue a amended assessment for the past X years based on this pattern of non-declared income ....You cant really object since you cant prove it wrong without an admission of guilt and proof of the actual cash avoided. You don't have proof.
They then wander around your home and business and look at your assets. New car , pool, driveway. holidays boat ?? How did you pay for it ? It starts to get very personal now. Your bank wont lend to you to pay a tax debt perhaps. Sell the house ?? Wife is far from impressed. She told you this would happen she says.
Add penalties. Add interest. Perhaps even a criminal charge.
My tip : If you are a tradie who accepts cash, ALWAYS regularly bank some cash. Banking none is a huge red flag.
You cant claim the deduction without receipts. Or add to CGT cost base. At a 40% marginal tax rate that's a loss of refund of $1600 for a $4K outlay. And no workers comp cover ? An uninsured job if you have a issue later ?? It also speaks for the honesty of tradie...Dulux $50 or Pascal paint for $15 from Masters ??? Surface prep ???Nah...Cheaper to just paint over dirt. How do you know what corners they will cut. They are dishonest.
For a tradie its a very dumb way to operate. Too often they say everyone does it. Yep and not everyone gets caught. But when they do.....One pissed off client and you end up with an anon tip off to the tax office who do investigate each of these tips. Who come out to audit.
Having supported clients in this position you wont know why or what they are looking for when they audit. It seems so routine. Just a GST review. They are looking for just one unbanked deposit. They wont find it. You now have a problem. If they find undeclared income once it escalates. So they start with further questions. They ask about how you quote etc...They they review EVERY quote for the past six months knocking on doors if they have to. The junior officer gets paid $50K. He hates tax avoiders. They then issue a amended assessment for the past X years based on this pattern of non-declared income ....You cant really object since you cant prove it wrong without an admission of guilt and proof of the actual cash avoided. You don't have proof.
They then wander around your home and business and look at your assets. New car , pool, driveway. holidays boat ?? How did you pay for it ? It starts to get very personal now. Your bank wont lend to you to pay a tax debt perhaps. Sell the house ?? Wife is far from impressed. She told you this would happen she says.
Add penalties. Add interest. Perhaps even a criminal charge.
My tip : If you are a tradie who accepts cash, ALWAYS regularly bank some cash. Banking none is a huge red flag.
Use one or two of those sites like serviceseeking.com.au or highpages.com.au
Definitely don't go cash for all the reasons listed above, you're the one losing out.
Definitely don't go cash for all the reasons listed above, you're the one losing out.
Where is the property? I won't list the work in Gumtree, but might be useful to contact the people who list their business there. I find them to be cheaper than some that I find in ServiceSeeking and Hipages.
Gumtree handyman with ABN - $35-40 per hour for Maitland, did a pretty decent work for what I need.
ServiceSeeking and Hipages - $55-$60 plus GST
That said, the gutterer and floor sander I found on Hipages are pretty responsive. So that's that.
It's been said a few times the "ATO" watch this site not sure if they do or they don't and I don't care,but paying someone cash leaves you holding the can,what happen if the painter falls off the ladder people get killed every day on sites falling of ladders and if they want cash they wont have any personal insurance worker comp ect,what happens if the paint start to bubble out a few weeks after the painter is long gone, there is heaps of good tax paying with insurance Painters out there just give this person a miss and find someone who goes by the book..imho..
Apart from what everyone else has said if the painter is willing to defraud the gov't then what's to say he won't do the dodgy on you.
Whether it be if you arrange to pay 50% upfront for the work and they disappear and you've got no evidence that you actually contracted them for the work, to you paying the agreed amount which includes a certain quality of paint and then they buy the $20 4L tin of interior paint from Masters and paint your house in that.
You would have no recourse.
Whether it be if you arrange to pay 50% upfront for the work and they disappear and you've got no evidence that you actually contracted them for the work, to you paying the agreed amount which includes a certain quality of paint and then they buy the $20 4L tin of interior paint from Masters and paint your house in that.
You would have no recourse.
This. Also, you're assisting them in defrauding the govt., and are just as liable. Get a few quotes, and pay a fair and reasonable price.
