2018-19 Federal Budget Report: Black Economy

 

What was announced

  • Key Announcements
  • Extending Taxable payments reporting system
  • Introduction of economy-wide cash payment limit
  • New and enhanced ATO enforcement
  • Removing tax deductibility where PAYG not withheld

Extending Taxable payments reporting system

As part of the Government’s measures to tackle the Black Economy, the Taxable payments reporting system (TPRS) will be expanded to the following industries:
  • Security providers and investigation services;
  • Road freight transport; and
  • Computer system design and related services.
Where the TPRS regime applies, businesses are obliged to report payments to contractors to the ATO.
This information allows the ATO to identify and ultimately collect tax on unreported income arising from cash payments.  

The measure has been introduced following the Black Economy Taskforce findings that contractors in these industries have been earmarked by the ATO as presenting a higher risk of not meeting their tax obligations.
The broadening of this measure will result in additional compliance for affected businesses as they will need to ensure that they collect information from 1 July 2019, with the first annual report required in August 2020.

The ATO will roll out a new online form that it believes will make the reporting process and compliance easier for businesses.

Introduction of economy-wide cash payment limit

From 1 July 2019, the Government will introduce a limit of $10,000 for cash payments made to businesses for goods and services. This measure will require transactions over $10,000 to be made through an electronic payment system or cheque. Transactions with financial institutions or consumer to consumer non-business transactions will not be affected.

This action was recommended by the Black Economy Taskforce in order to tackle tax evasion and money laundering.

New and enhanced ATO enforcement

The Government will inject $318.5 million over four years to implement new strategies to combat the “Black Economy” including enhanced enforcement strategies that brings together:
  • New mobile strike teams and an increased audit presence; 
  • A Black Economy Hotline that will allow for the community to report black economy and illegal phoenix activities; and
  • Improved government data analytics, and educational activities.
These measures will support the new multi-agency Black Economy Standing Taskforce to provide for a more coordinated approach to combating the black economy behaviours through improved government data analytics and information sharing between enforcement agencies.

Removing tax deductibility where PAYG not withheld

From 1 July 2019, businesses will be denied tax deductions for payments to their employees where they have not withheld the required PAYG.

The Government will also disallow deductions for payments made by businesses to contractors where the contractor does not provide an ABN and the business does not withhold PAYG.

Whilst not addressed in the Budget papers, it is presumed that relevant payments should become tax deductible once PAYG and ABN withholding obligations have later been met by the payer.