I guess the other question is - how are you covered legally if you pay cash?
If you receive an invoice and/or a receipt acknowledging your payment then you are covered; ie you got a service and it’s paid for and there is proof.
If you pay cash with no acknowledgement, you have no comeback.
How do you complain if there’s a problem with the work?
How do you prove you even paid?
A lot more can happen when a service is done than just the straightforward scenarios where it’s finished satisfactorily and you pay and forget.
If something goes south, a cash payment leaves you with no (by the book) legal avenues.
Try suing someone you knowingly paid in cash.
You’ve got nothing to show you had a legally binding contract (contract law is another kettle of fish) but when the transaction is traceable, it gives you the chance of legal redress if you need it.
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),
My comments and opinions are from 50 years of real world experience in the construction industry as Project Engineer and Manager, progressing to owner of an engineering business, and owner/builder of factory warehouses and domestic dwellings with extensive dealings with tradies and subcontractors.
Thank you. This is the advice I was seeking. What are the risks for me? I also wonder whether insurance can be claimed by the tradie or the owner in the event of an accident if there is no proof of contract
To note:
A contract can be anything from a formal written document to a verbal promise. Learn about written, verbal, standard form and period contracts, and things to be aware of before you make an agreement.
Types of contracts | business.gov.au.
Evidence of the contract for the purposes of insurance or other - might make a whole new topic of discussion.
The greater risk of not having evidence may be with the service provider in the instance the customer refuses payment at the end of the job. The best protection for both the business (includes sole traders) and the customer is a written quote or booking. May be as simple as an SMS.
Or to consider:
The risk to you is you don’t have legal rights and everything that implies.
How can you make an insurance claim if you don’t have any proof of the transaction?
Insurance claims all start with a legal invoice or receipt as far as I know.
Check Consumer law in your state.
A lot of this is just common sense.
Cheers
Why does cash payment mean no tax invoice or receipt? Aren’t those acceptable proof of purchase?
I never said
My initial post was about what the benefit of having an invoice or receipt is.
The benefit applies for payment in any form.
Is that a real risk?
The law recognises verbal promises.
Would it be better to consider what the ACCC advises.
There is generally a contract whenever a seller makes an offer and a buyer accepts it.
Noting first:
The buyer can accept a contract:
- by signing a written document
- by saying they accept it
- through actions such as paying for a product or clicking ‘I agree’ on a website.
And
A contract is an agreement made between 2 or more parties that is legally enforceable. Legally enforceable means if one of the parties breaks the contract, the other party can take legal action against them.
There is no precondition that the contract formed must be written or recorded.
Is the real risk one’s ability to provide evidence as to what was agreed? Hence the ability to successfully pursue your legal rights.
It’s clear that to be covered you only need a receipt (whatever form of payment).
@lg16447 you haven’t mentioned if you’re being asked to pay cash and do without a receipt?
Good luck with that.
No differently to other payment methods. Payment type doesn’t affect legal responsibilities. We have paid tradies in cash, by card and through bank transfers in the past as each form of payment is seen the same.
What is important is if is significant work (often called building work under state legislation), that the tradies have appropriate licence to carry out the work. If work also involves plumbing, gas or electricity (which is possible for landscaping works such as an outdoor entertaining area), the tradie should have the appropriate licence/qualification to carry out work on these.
You don’t even need that. All you need is evidence the person carried out the work. This could be a text message, photo of the person working on site etc.
Fully agree. If the works are more complicated and has multifaceted, verbal contracts can become a nightmare. If the landscape works are say mowing the lawn, you don’t need a written contract as the works are simple. If the works require say a retaining wall, gas and electrical connections, stormwater drainage, paving etc, not having a written contract means it becomes a ‘he says, she says’ situation. There is a lot higher risk of miscommunication, expectations being different and disputes.
So if you pay cash and get a tax invoice you do have proof of purchase. What situation were you referring to where you don’t get proof of purchase paying cash?
Thanks everyone. Plenty to think about
I have had concreting work done by a tradie who gives me the invoices to go and pay his suppliers for the concrete and other materials used so that the money doesn’t have to go through him for his supplies, it also means that I am paying his accurate costs, not cost plus whatever the tradie chooses to add on.
When we are put in this position, we ordinarily state that we work from home, and intend to declare the work in our tax forms so that we can reduce our tax load. Hence, we’re happy to pay in used notes, but we will need a formal invoice for the ATO.
We try to tell the people giving us the quotes that this is a requirement before they provide the quote. I recognize that we are probably inflating the quoted prices, but we get a lot of societal benefits from tax, so we’re happy.
Until about 5 years ago there was a timber yard in my town. The owner didn’t have card facilities. He didn’t even have a computer. He used a ledger to check the price per set length of the wood or other product you required and a hand held calculator to work out prices for your quantity etc. When I shopped their I always had the feeling that I had passed through a time gate and was back in the 1970’s.
Whilst people have mentioned the risks if an uninsured tradie damages your property or person, what concerns me more is what happens if the tradie injures themselves.
My understanding is that you are liable. That could amount to millions of dollars if they require ongoing support through their life because of a permanent disability.
Yes. This is what concerns me
I wonder which source inferred that and whether it was a qualified statement made in any context? It’s not within the scope of this website to provide legal advice. To note one may not be liable. There are steps that one should take to minimise liability. It’s a different (off) topic in respect of whether one should pay by cash.
To note we engage contractors on a regular basis to carry out work or perform services around our home and property.
Our understanding is the risks are greater if one has engaged the tradie or person as a worker and not as a contractor. Requesting a formal quote with a total estimate or fixed price for the job is one way to establish a contract. Which may also respond to,
One can also ask a contractor to show evidence they are properly qualified and where necessary registered for the work to be performed, have current workers compensation cover, and appropriate business insurance cover for the type of work requested. Best to do so before accepting their quote.
One example as to when one may be considered responsible - relevant only to Queensland and the examples provided. Not necessarily the only source of suitable cover.
A comprehensive home insurance policy only provides general cover for guests and visitors. There are restrictions and limitations. These can vary slightly between insurers, hence best to refer to the policy and PDS.
My take on this is if by example a visitor to the house gets bitten by a black snake on the way in it’s likely covered. If I employ a Landcare contractor to do work in the long grass and the black snake bites them. Providing I can demonstrate they were employed as an independent contractor it’s unlikely they have a claim against the owner. It’s a risk they would reasonably be expected to assess and have appropriate insurance cover for. I do check. It’s likely very different though if it was my pet bull, and I failed to advise the contractor of or properly secure the pet bull who has poor eye sight and dislikes strangers.
It would be a fair assumption that a tradie who operates in a cash in hand basis is not set up to be covered by any sort of worker’s compensation as an employee, or have sole trader insurance.
So it is down to you as a home owner to have some liability insurance. My home owner insurance comes with ten million dollars liability cover. But I haven’t checked for the terms and conditions, and I really should.
But then I don’t deal with cash in hand tradies, only legitimate trade businesses with company names and ABNs, so feel more confident that they will be properly insured.
And I minimize actions that could contribute to my liability if an accident occurs. So I do not supply any things like power tools, or ladders, that could be faulty. The tradie has to provide all their own equipment and materials.
