Cash jobs: Will you pay cash to people for odd jobs and thus help them avoid tax?

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Forums › Finance and wealth management › Cash jobs: Will you pay cash to people for odd jobs and thus help them avoid tax?

frednz

1431 posts

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#243299 5-Dec-2018 08:59

I was at a function the other night and we were talking about having work done around the house, such as cleaning, bush trimming, painting etc. A common theme was that a lot of trades people are saying they will do the job only if you pay them in cash.

I guess this means they will pocket the cash and not declare it for tax purposes or pay GST.

So, will you pay cash for getting odd jobs done around the home knowing that this is probably helping people avoid tax?

Or doesn't it matter to you as long as the job gets done for a cheaper rate than that charged by those who follow the rules?

I found this example to be of interest. A friend employed a person to do some painting on the basis that the painter would charge in cash $60 per hour for the work done. The painter spent 8 hours doing the job and said that will cost $552. When my friend said wouldn't it be $480 (8 hours @ $60 per hour) the painter said yes it's $480 plus GST of course!

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1015 posts

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Subscriber

#2139580 5-Dec-2018 09:08

I'm happy to pay a cheaper price for cash. Now if workers don't fullfill their task obligations, that's their problem...

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KrazyKid

1145 posts

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#2139581 5-Dec-2018 09:08

I'm sure many people will pay cash to get a cheaper deal. Me included. However I sure this was the case before GST. People didn't declare the income and paid less business tax.

At least with GST you get to capture the income when the business owner spends the cash on other things like new cars or an extra chocolate bar from the supermarket

Coil

6614 posts

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#2139582 5-Dec-2018 09:10

I always pay my friends cash for things they do for me and vice versa. For example put a hole in my wall, my builder mate came and fixed it for $50 and a box of beer. His emails ceased to function with his domain, he paid me $50 and a box to come and fix it..

This is keeping our money local as well, and helping the people we know. Sure we are not paying tax on those transactions but there is no need to, these are small acts that are too infrequent and small of value to declare income on.

I do not agree with trade people or customers who go around looking for cash work. The funny thing is that most of the time the customer expects to pay what it would cost without tax per hour to the worker who is now breaking the law and taking risk for no benefit.. Some take these jobs as they are struggling for work and feel they have no choice.

SpartanVXL

845 posts

Ultimate Geek

#2139583 5-Dec-2018 09:12

If it's hard cash for a job then there's usually no invoice. No invoice means you can't really follow up on then if something goes wrong. What the person does with the cash is usually not your concern, you don't worry day to day about whether somebody has done their tax properly. Thats their responsibility.

Your friend example is just the painter being a butt. I can't if there is a law that requires you to list pricing incl. GST, but most people list the final price for the customer so as not to incur badwill. Otherwise you get what PBtech used to do, sales listing price sans GST to get people in the door.

xcon

146 posts

Master Geek

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#2139584 5-Dec-2018 09:13

Yes , if they were able to meet my time-line that gst registered trades people could not as there is a long wait period for then to schedule me in

This tends to dictate a cash job for me

And normally (well most of the time) , the price quoted is including ("gst" ) upon negotiation

Gordy7

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#2139587 5-Dec-2018 09:17

GST extra

If GST is not included in a quote or advertised price, this must be made clear. If it isn’t, you can argue that you should just pay the figure quoted. Companies that didn’t make it clear their advertised prices didn’t include GST have been prosecuted and fined.

It is still common for tradespeople to exclude GST. When you first ask for a quote, check the GST status.

From:

https://www.consumer.org.nz/articles/fair-trading-act

Gordy

My first ever network connection was a 1MHz AM crystal(OA91) radio receiver.

MurrayM

2207 posts

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#2139592 5-Dec-2018 09:28

Nope. I want a professional job done and I want it properly documented in case there are any problems with the work in the future. IMHO professionals don't do cashies, that's the domain of cowboys.

As for friends helping each other out, amoungst my circle we we normally help each other for a couple of bottles of good wine or a box of beer; no cash involved.

NorthernZone

68 posts

Master Geek

#2139593 5-Dec-2018 09:29

I'm fairly tolerant of (say) tradies who do an extra job on their weekends for cash but I strongly oppose those who are effectively working fulltime on a cash-only basis (and so presumably not paying their share of tax, ACC etc). And if they charge as much as regular businesses that are doing the right thing then I get really pissed off. Most individual house-cleaners work on a cash basis yet most charge as much on an hourly basis as legal businesses. Grr! And I have used a dog groomer who charges like a wounded bull yet insists on cash payment from all her clients (and she is always busy - not least because she does a good job). I'm so tempted to dob her in with IRD! Should I?

Batman

Mad Scientist
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#2139594 5-Dec-2018 09:29

Cash is an official currency for sale transaction far as I know.

On the other hand, I know of business owners putting their entire family expenditure on their company's cashless accounts.

Which is the bigger crime?

Involuntary autocorrect in operation on mobile device. Apologies in advance.

afe66

2919 posts

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#2139598 5-Dec-2018 09:33

No.

Sugar coat it as much as you want but I would consider that to be facilitating tax fraud.

If a tradesman tried to do that to me I'd get different tradesman. No invoices, no backup. Might drop a note to ird too.

$50 isn't much to you but then 50,000 isn't much to a multimillionaire, Slippery slope.

Dairyxox

1590 posts

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#2139643 5-Dec-2018 09:47

MurrayM:
Nope. I want a professional job done and I want it properly documented in case there are any problems with the work in the future. IMHO professionals don't do cashies, that's the domain of cowboys.

As for friends helping each other out, amoungst my circle we we normally help each other for a couple of bottles of good wine or a box of beer; no cash involved.

I don't really get this. It takes time and effort (travel) to go and get a box of beer.

GST is paid on the purchase.

And it makes me feel awkward if someone offers me this because I don't drink alcohol? So whats the alternative? A supermarket voucher? Some rump steak?

Geektastic

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#2139645 5-Dec-2018 09:52

I'll pay in cash - it's as valid a method of payment as anything else.

I'll still need the invoice for the accountants though in most cases.

What someone pays or does not pay in tax is none of my business.

nickb800

2640 posts

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#2139650 5-Dec-2018 10:03

NorthernZone:

I'm fairly tolerant of (say) tradies who do an extra job on their weekends for cash but I strongly oppose those who are effectively working fulltime on a cash-only basis (and so presumably not paying their share of tax, ACC etc). And if they charge as much as regular businesses that are doing the right thing then I get really pissed off. Most individual house-cleaners work on a cash basis yet most charge as much on an hourly basis as legal businesses. Grr! And I have used a dog groomer who charges like a wounded bull yet insists on cash payment from all her clients (and she is always busy - not least because she does a good job). I'm so tempted to dob her in with IRD! Should I?

That's an interesting one when they charge as much as tax inclusive price for a cash job. I wonder if they would defend it as a level playing field because they aren't undercutting tax paying businesses!

From time to time you see the suggestion that procuring cash jobs should be made illegal - e.g. you were considered an accomplice to tax fraud if you asked for a cash job or agreed to one being offered. I suspect in most cases the 'tax free' discount is mostly pocketed by the worker rather than the customer, but the customer usually benefits. It would probably be quite effective. The current model of pinging only the worker probably does little to deter the average Monday-Friday worker from doing a Saturday morning cash job, although it is somewhat effective at deterring workers doing a full-time cash free gig.

Another factor to consider is student loan repayments (albeit less relevant for tradies), child support and working for families. Add these to GST and income tax, and many individuals will find their effective marginal tax rate is well north of 50%. You never know how much a worker benefits from a cash deal, but it can be substantial compared to an extra hour of wages.

MurrayM

2207 posts

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#2139667 5-Dec-2018 10:35

Dairyxox:
MurrayM:

Nope. I want a professional job done and I want it properly documented in case there are any problems with the work in the future. IMHO professionals don't do cashies, that's the domain of cowboys.

As for friends helping each other out, amoungst my circle we we normally help each other for a couple of bottles of good wine or a box of beer; no cash involved.

I don't really get this. It takes time and effort (travel) to go and get a box of beer. GST is paid on the purchase. And it makes me feel awkward if someone offers me this because I don't drink alcohol? So whats the alternative? A supermarket voucher? Some rump steak?

Well I guess it's whatever you want to arrange between yourself and your friends. If one of my friends didn't want alcohol (perfectly valid) then I'd agree on something else. I hardly ever have more than $40 in cash on me at any time, and to me it seems weird to ask for cash from my friends/family. Often I'll help out without expecting anything in return, it just depends on what's involved and how long it takes.

Aredwood

3885 posts

Uber Geek

#2139694 5-Dec-2018 11:12

The tradie might be insisting on cash, as a means of ensuring prompt payment. If the government wants to get rid of cash payments. Best thing would be to tell the banks to hurry up and implement instant transfers between accounts at different banks.

Doesn't help that merchant accounts for accepting EFTPOS and credit cards, simply make a single deposit for all of the days transactions. Which makes accounting using bank statements as the primary reference a lot harder.

If we assume that the tradie is dodging tax, they will still have to pay GST on any business expenses. So the biggest incentive to accept cashies, is by tradies who don't need to supply much in the way of materials as part of their job. (Total job cost is mostly labour). Which agrees with the Dog groomer and house cleaner examples above. And that assumes that their turnover even exceeds the threshold where you have to register for GST

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