Cash payments to tradies

A recommended landscaper asks to be paid in cash as he says he has paid in cash for materials. I know what is going on as in tax avoidance. Am I taking risks paying this way?

Some tradies like to deal in cash. I don’t care about if they are trying to avoid tax. But a cash only business is a red flag to me.

But I never pay cash up front. Only on results.

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Cash includes hard currency, but also includes bank transfers. Maybe offer payment by bank transfer if you don’t want to deal in notes.

Almost everyone doesn’t accept cheques which is the other form of cash payment.

Some sole traders still don’t offer card payment methods due to merchant fees attached to the payment or inability to get POS console due to their credit rating.

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Recommendation was from who? Answering that may help determine their reliability somewhat.

Just because they paid for goods in cash, doesn’t mean that you paying by electronic means, e.g. a bank transfer, is any less effective than cash repayment.

Are they issuing a receipt for your payment? One that is immediate and has all the details required by law? If they are not providing a receipt then you are risking your ability to recover any payments for defective work/service using Australian Consumer Law, as you need to provide proof of payment in any dispute.

If they are dodging tax by using cash payments, this doesn’t mean their work is not worth paying for, but it should raise flags. So it is back to the original question of who recommended them and how well do you trust that recommendation.

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This tradie makes it clear he wants notes not bank deposits so not subject to tax

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I don’t think there is any law that requires you not to pay cash even if you believe the person is not going to pay taxes due on that income, unless you are an employer. However, the ATO encourages you to “dob them in”. It is the honesty of the independent contractor that is put into question and particularly if they are not willing to provide a proper receipt.

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Well, if I were in that position, I would say that I don’t deal in cash, because it is inconvenient for me go to a bank branch and withdraw cash.

So, you want payment?. Give me an invoice showing payment methods. Your bsb/account number will be fine for a money transfer.

And do society a favour and dob them into the ATO.

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Paying by cash is not on its own unacceptable or evidence of tax avoidance. It’s how the business manages its reporting to the ATO at tax time of that payment or not that is important. Has the business indicated it will not provide a tax invoice and or receipt for payment?

For evidence of payment, note there is a legal requirement to do so if requested by the purchaser for payments of more than $82.50
Tax invoices | Australian Taxation Office

I’ve paid for lesser value services ($x100’s) in cash because the provider does not accept payment by card. No problems obtaining a receipt or invoice on the day including the suppliers ABN. Otherwise I’ll wait for the tax invoice and pay directly to the nominated account according to the claim.

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I am wondering if the worker will be insured if there is an accident while working in my property

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Unless you are employing them you are not responsible.

It hardly seems practical or reasonable for you to be checking that those you deal with are up to date on every legal requirement of running their business.

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A more general concern is whether the business providing the landscaping services is insured. The following may prove a useful resource and contact to assess what should be provided.

What insurance do I need for my landscaping business? | The Landscape Association

Assume for a payment by cash the job in question is relatively small. It does not excuse the need for the business to be insured. It’s a reason to be cautious if insurance is not in place.

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It is my opinion that we should be helping each other wherever we can and support our communities. Tradies that enjoy being paid in cash should factor this into their price, so that there is a win win. The Grubberment go after the small guys instead of the huge money laundering conglomerates. So we really should change our mindsets around supporting each other (my opinion?)

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Welcome @Moon888 to the community.

For those with a community that’s well established with good spirit and contact - doubtless opportunity to encourage good business. Many though find themselves having to move often, to follow the work and the opportunities. Large portions of society have limited opportunities to become part of a community. For those Aussies a business can become just another faceless transaction. In the larger cities the large franchises and commercial trade groups stand out. There may be few alternatives.

Different to what others are talking about in this topic.
Is there an issue with paying cash?
Not if the provider invoices or receipts according to the ATO requirements.

However it is factored, for the community the greater benefit comes with correctly reporting income and paying what is owed. Any other way is unfairly shifting more of the burden on to those who do the right thing. Including many small businesses.

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It doesn’t matter if you pay in cash, but you should insist on receiving a tax invoice. That is a legal requirement for anyone who is selling a product or service.

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Of course all “tradies” want cash and this is why. Their material purchases will be GST inclusive but they’ll claim 10% BAS rebate.

Generally, their cash income won’t be declared in their tax return, so there’s 30 cents in the dollar profit as well.

What the tradies won’t tell you, is you’re paying a 10% premium on materials and 30% premium on labour when it’s a cash transaction.

Nice if you can pull it off…

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If paying cash to an electrician or gas fitter make sure you get the relevant forms that meet government and your insurance company standards . Often jobs done for cash do not give these certificates .

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Child Support was calculated from their taxable income. If income is not declared, they avoid paying (maybe any) child support

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Assuming that the work being quoted is cash in hand to avoid paying tax (it is an allegation made by some community members and not a fact), claiming GST back on purchases would be a very quick way to get caught by the ATO. For BAS statements, income incurring GST also needs to be presented. If expenses are high and income low compared to industry averages, this will be a flag for further investigation by the ATO.

For sole traders and family partnerships, which most tradies have as business structures, the tax rate is based on the personal tax marginal rate. This could be nil up to 45% + Medicare levies.

30% business tax rates only applies to companies, not to sole traders or family partnerships. It is possible the tradie works for a large company, but, if the tradie does, the tradie don’t benefit from the 30% business tax not being paid. Only the company would if they knew and pocketed the cash payment - this scenario is unlikely. The tradie could be ‘moonlighting’, but this is a separate issue.

There is no evidence the tradie is trying to avoid tax, child support etc. It is pure speculation that this could be occurring.

It could be reasonably speculated that the tradie prefers payment in cash for some genuine reason. If it isn’t a significant amount, a tradie could ask for cash especially if materials for a job are being bought while the job is undertaken. It reduces fees associated with credit and financial transactions. These fees could be many percentages of the material costs. Paying by cash may likewise reduce the cost of work.

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There is no overhead to a tradie being paid by a money transfer into their bank account.

Unless of course they do not want income appearing in some account and therefore visible to auditors or the ATO. Which would complicate a tax avoidance methodology. And oops a tax overhead.

Pay attention to what the original poster said. The tradie wanted cash notes to avoid tax.

I for one will not participate in enabling cash only transactions by physical cash to tradies because I see it as tax avoidance. I pay tax on my income. So should they.

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That’s correct, but, if the tradie is buying materials during the works, the seller of materials can charge for credit or merchant fees/surcharges for payments. There are many members who have posted in the community they don’t like paying such fees. It is reasonable to assume there will be tradies which also don’t or want to pass these charges onto their customers.

There is also potential a supplier only takes cash. If they do, the tradie having cash reduces their costs by not having to go and get cash out somewhere.

There are old school tradies out there which haven’t moved onto more modern payment methods. Because a tradie (or any seller) doesn’t, doesn’t automatically they are in the business of tax avoidance.

If one runs s business, it is extremely difficult to hide payments using cash. The ATO has sophisticated systems to monitor businesses and catch those which don’t look right. If the tradie was avoiding tax, days are numbered to the ATO knocking at the door.

A consumer shouldn’t be speculating without any evidence. It can damage the reputation of individuals and in some cases, could be defamatory.

If a consumer is dealing with a business and it doesn’t feel right for some reason, a consumer has the ability to take their business elsewhere. We have done this in the past with tradies where first impressions didn’t gel with our expectations

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