The federal government should look to implement a recommendation from the Black Economic Taskforce that’ll see cash limits imposed on business transactions over $10,000, according to the Institute of Public Accountants (IPA).
IPA urges government to revisit Black Economy Taskforce recommendation
The IPA said the Black Economy Taskforce recommendation to impose the cash limit should be revisited. In 2017, the Black Economy Taskforce estimated the potential size of the black economy to be $50 billion, or 3 per cent of gross domestic product.
The plea from the IPA comes at an opportune time for the government with the amount of cash circulating in the economy increasing to $102.7 billion.
“Some of this is people hoarding cash in uncertain times,” IPA senior tax adviser, Tony Greco, said.
“A significant portion, however, is flowing into the black economy which continues to grow. It’s being used for cash jobs, such as building renovations and house repairs, which winds up as undeclared income.
“We need to make it harder for people to dodge their tax obligations, to launder money, and double dip as undeclared income can increase participants entitlements under our social welfare system.”
The IPA flagged that banknotes remained “extraordinarily high” in 2021, with the body estimating that there is currently around $4,000 worth of notes on issue for every person in Australia, including children.
Further, the IPA pointed to ATO tax gap figures that show the combined tax gap for individuals and small business rose to $20.9 billion in the 12 months to 30 June 2019.
A significant proportion of the tax gap for these two groups is related to undeclared income, the IPA flagged.
“Cash limits on business transactions are already in place in other countries, several of which have set the bar much lower ($1,000). We’ve got to make it harder for the black economy to operate in order to preserve the integrity and fairness of our tax system,” Mr Greco said.
“If you don’t, people doing the right thing will end up paying more and some will be encouraged to look for ways to join the club.
“The current tax gaps are too big to ignore, we need to start chipping away at the problem.”
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