For The Bean Counters !

[gcg7861]

Hai everybody,

So i've been introduced to the world of cash in hand wages.

Previously working in accounting and moving to security, I can't seem to get any jobs/employers who want to pay my super, tax etc etc... Naturally it waves a red flag.

First thing first is I don't want to take the risk of working cash in hand, which is illegal, secondly how do these employers and employees actually get away with is. I've thought of every possible way in my accounting knowledge and there's no solution. So what are they doing to not get busted? why are they doing this? What is the benefit besides tax evasion which is risky?

Anyone else out there with knowledge, business owners accountants or whatever, no need for minor details, but shedding light on this would be helpful.

Cheers

Bill

[satanic]

You'll find that it's not 100% cash-in-hand; the mix would most probably be something which would look ridiculously low on the books, but still register as an 'expense'.

Employers do it to save on related on-costs such as Superannuation; which in turn helps cash flow etc.

Employees do it because it's tax-free income; great for those with 2 or 3 jobs.

You'll also find that this scenario is really only doable in a small, cash-based system where many things can go 'off the books' and aren't scrutinized as much (if at all). You'll never see this in a large company as the extra costs with having things "on the books" is all deductible.

[MrStabby]

If you're not on the books you wont be covered by workers comp, so what happens if you get injured on the job?

[Kujotk]

...moving to security.

What type of security? If you mean security guard/bouncer I can think of a couple of areas why they will only give you cash in hand, primarily because its a lucrative market with almost all profit comming into the business by cash and almost all of it is off the books.

[gcg7861]

Yep, Its mostly doorman, bouncering, but not often, and not for big venues.

I am trying to stick with factory sights, schools residentail areas, and it gives the same result.

Also, so your saying they pretty much cover a proportion of income which should be declared, in non-deductible expenses?

[Duncan]

simply enough - there is absolutely no legal way to employ someone cash in hand.

on top of the net you receive, employers must pay tax to the ATO on your behalf, pay 9% super (up to a limit, if you are not casual), pay worker's comp, pay payroll tax (if they are over a certain size, $600kpa wages in NSW). And meet all award requirements like overtime, loadings, allowances, annual leave, sick leave and long service leave.

the only possible grey area is if they claim you a "contractor" in which case you are a business and must pay for all of those things yourself. In almost every case that goes to court, the business claiming it's people are contractors loses, and they have to pay back costs of all the above.

how it happens is when the person just needs a job - when you need the money you accept the dodgy deal because its better than nothing. Its that simple.

don't take a cash job unless you have to. If you have to keep detailed records of every day you work, how long and what they paid you. When you no longer need that job you have the option to go after the employer for all of the back tax, wages, overtime, super etc etc. They will absolutely lose for sure, the amount you earned will be deemed net and they will habve to pay another 50-100% on top of what you got cash.

however....having said that....I would not be going after a night club or similar for back wages. You might find they have "people" and no-one needs that shit.

[satanic]

Also, so your saying they pretty much cover a proportion of income which should be declared, in non-deductible expenses?

Basically they will lodge your "income" as the bare minimum so that there are still some salary expenses on their books, however through close scrutiny of the employment laws, you will not be offered any of the usual benefits.

Example:

On the books you get $400 a month; but off the books you get $2K cash in hand. The employer then has no obligation to pay superannuation as it is under the $450 threshold per month before it's applicable, nor will there be any PAYG payable as your reportable income is so low. Payroll tax is a non-issue, as a company who engages in this will probably not be anywhere near the $600K or so required.

What this means for you...

* If you get injured at work, you will not be covered and you'll have to take the employer to court

* If you want to get a loan, you won't have much luck as you won't have any official "income" to show

* If you start getting fancy with your financials, chances are you'll get audited by the ATO

Even though all things point to the employer breaking the law, it works both ways. Say you engaged in such employment for many years and finally something came unstuck. Chances are, you'll be liable for tax evasion as you did not report that income when filing your returns. Saying you have a dodgey employer is not an excuse.

Back onto the employer side, the "contractor" excuse is not valid for the fact everything you do points to you being an employee. The laws have tightened around this and simple tests surrounding principle sources of income, time spent on 'contract', etc will quickly make you an employee, not a contractor.

As Duncan said, the only real upside to being paid cash is the fact you will have a job... for the likes of working travelers, minors - they may simply not care about the protections offered otherwise.

[SECURITY]

even if you do go after them for the back pay their argument would be that you falsified records to get more money from them. security companies do have guys on the books but its a very small percentage, maybe 20-30% are on the books and denying that you did more then 1 shift is too easy. when there is cash paid there is no real evidence that you were ever there.

[Kujotk]

even if you do go after them for the back pay their argument would be that you falsified records to get more money from them. security companies do have guys on the books but its a very small percentage, maybe 20-30% are on the books and denying that you did more then 1 shift is too easy. when there is cash paid there is no real evidence that you were ever there.

yup i was just about to come on and say that basically there is no formal proof of work being done.

Also to get around OH&S accidents and being covered all you do is fudge the books, declare minimum wage, limmited days/shifts/hours, and get the worker to sign every pay check and hours worked as being true.

Small business gets benefit of saving on super, overtime pay, holliday pay, anual leave, can fire there employees for any reason and even for no reason and even save on some forms of insurance ect...

The worker isn't bound by a contract or any of that crap, worker doesn't need to pay tax, can quit when ever, can collect welfare payments while working ect...

also just because you learnt at uni that you earn X amount means that you automatically have to pay 40% to tax because thats the tax bracket. Depending on what industry your in you can end up getting most of your tax back. Find yourself a good asian or wog accountant who knows all the loopholes instead of just doing what they are taught at uni's. Anyone can be an acountant and do their own, just like there are many reasons and ways around having to be on the books during employment.

For every business rule there is a smarter business man who has worked a way around the rules legally.

[GTR-N1]

why are they doing this?

I can't add any more to the points of reference that Stan, Duncan, Joe & Tom have covered already.

If a company wants to get rid of $$$ in cash, it can be due to the fact that the company can't show that $$$ in its books.

They may have procured this $$$ in kickbacks or worse still, through drugs/prostitution/other illegal dealings (which would be a clandestine operation). For example, even in just a car forum like this, news about people who deal in 'cut&shut' rebirthed vehicles, reveal that they always deal in cash.

[Kujotk]

simply enough - there is absolutely no legal way to employ someone cash in hand.

on top of the net you receive, employers must pay tax to the ATO on your behalf, pay 9% super (up to a limit, if you are not casual), pay worker's comp, pay payroll tax (if they are over a certain size, $600kpa wages in NSW). And meet all award requirements like overtime, loadings, allowances, annual leave, sick leave and long service leave.

the only possible grey area is if they claim you a "contractor" in which case you are a business and must pay for all of those things yourself. In almost every case that goes to court, the business claiming it's people are contractors loses, and they have to pay back costs of all the above.

There are legal ways that invove cash in hand Duncan.

And I strongly dissagree with the claim that "almost every case that goes to court, businesses claiming it's people are contractors loses...." I don't know who has told you that but they are wrong.

Lets just say from personal experiences and Audits conducted by certain government institutions, most matters never make it to court, and it is allot harder to prove in court that someone was an employee and not a subby anyway. In my industry I make sure my "subbies" have their own insurance. I do not need to check anything else, if they have their own insurance I am protected from any legal wrong doing. If my insurance covered the workers then thats another story....

Its all about pre-emptive strategy and planning. As ive said a million times before, theres many ways to skin a cat, and the successful business people know how to skin the cat fkn good while the others keep pushing shit uphill, not daring to step outside the box of accepted thinking.

[satanic]

I think you're confusing the term contractor and how it relates to the initial question. This link here will offer a better overview: http://www.ato.gov.au/businesses/content.a...ontent/4540.htm

In a nutshell, a contractor relation in its truest form will only exist if that person cannot otherwise be confused with any other employee within that organization.

In your industry you take on "subbies" and that is fine; but these "subbies" are there to satisfy a particular need or complete a particular task. Once that is finished, they are out of there. Moreover, if Joe Blogs is sick on Monday - he may send John Smith to do the job as John is part of XYZ Pty Ltd. Concurrent to your job, XYZ Pty Ltd may also have several other jobs going on as part of their normal course of business - this is why Joe Blogs / John Smith can be classified as a contractor.

On the other hand, if Joe Blogs / John Smith were to rock up to your factory Monday to Friday just like everyone else, on an indefinite contract and treated the same as everyone else there... that is another matter.

[Kujotk]

I think you're confusing the term contractor and how it relates to the initial question. This link here will offer a better overview: http://www.ato.gov.au/businesses/content.a...ontent/4540.htm

In a nutshell, a contractor relation in its truest form will only exist if that person cannot otherwise be confused with any other employee within that organization.

In your industry you take on "subbies" and that is fine; but these "subbies" are there to satisfy a particular need or complete a particular task. Once that is finished, they are out of there. Moreover, if Joe Blogs is sick on Monday - he may send John Smith to do the job as John is part of XYZ Pty Ltd. Concurrent to your job, XYZ Pty Ltd may also have several other jobs going on as part of their normal course of business - this is why Joe Blogs / John Smith can be classified as a contractor.

On the other hand, if Joe Blogs / John Smith were to rock up to your factory Monday to Friday just like everyone else, on an indefinite contract and treated the same as everyone else there... that is another matter.

read into it more carefully with the definitions of what a contractor is.

I'm not giving away all of my secrets because I have worked hard to do what I do and not have any legal repercussions, you guys can figure it out yourselves if you think it can benefit you.

But I do agree this scenario will be extremely dificult if the industry in question is a factory worker. But there are allot more jobs than just a factory worker in our society.

It also says a contractor is free to work for anyone and the general public ect.... it doesn't say that a contractor cannot work for one company indefinately, he is still free to work for anyone else, but he doesn't have to accept other jobs if he doesn't want to.

[MBS206]

You actually can pay people cash in hand legally, any form of payment is legal if it's recorded.

But places like security companies do it to avoid roughly 20% on workers comp, about the same on public liability, pay you a touch more while still saving them, ie they give you half the tax they would have paid and save the other, save on super annuation etc. All in all for every dollar you're paid on the books it costs an employer 50 cents to a dollar on top of what you earnt. Plus it then saves them in regards to bas etc.

Most places will pay roughly 1 / 3rd of your pay on the books to cover you insurance wise and make things look legit. Basically the company will pay out on the books every dollar that they earn on the books to avoid tax... For someone who worked in accounting shouldn't you know about this sort of thing?

[satanic]

All in all for every dollar you're paid on the books it costs an employer 50 cents to a dollar on top of what you earnt.

That figure for on-costs is way too high...

[The Bogan]

Part time cash in hand is good as it doesn't effect tax.

My 2 cents

[SECURITY]

it also matters on what you classify as a 'task'. if you are in security you can classify 'an entire contract' as a task, or if in construction you can classify 'all labouring work' as a task, or if you're in hairdressing you can classify 'all cutting of hair' as a task. or if a mechanic you can classify 'all rego checks' as a task.

the law leaves a lot of items to be interpreted as 'a reasonable man'. i think it is reasonable to assume that tasks around your business can be subcontracted 'indefinitely' especially if someone offered you that service. there is the legal way and then there is the legal way. as long as you can show reason to your way of thinking of how a reasonable man interprets the law then there is nothing to worry about.

[MBS206]

That figure for on-costs is way too high...

It depends on your industry. Office can be as low as 20cents but deal in high risk and you're looking at that figure. The tree lopping industry alone is 17 cents in every dollar workers comp alone. Add 9 cents for super, you're already at 26 cents in every dollar, then you need public liability, which for slot of high risk things out in the public, you're needing nearly another 20 cents in every dollar. It does add up, doing the paper work to run a business each year kinda brings the real values out

[satanic]

It depends on your industry. Office can be as low as 20cents but deal in high risk and you're looking at that figure. The tree lopping industry alone is 17 cents in every dollar workers comp alone. Add 9 cents for super, you're already at 26 cents in every dollar, then you need public liability, which for slot of high risk things out in the public, you're needing nearly another 20 cents in every dollar. It does add up, doing the paper work to run a business each year kinda brings the real values out

You're right... I've got my mind fixed on the office; completely forgot about the 'risk' factor in other jobs. Not much of a 'risk' working in an office you know

I still don't believe that it is quite THAT easy to justify the 'contractor' reasons. Even though you can argue "now" that people are there to carry out indefinite tasks; I think upon closer observation (i.e. an audit), you'll become unstuck. If being classified as a contractor was that easy, everyone would do it. Why not? Set yourself up as a business, land yourself a high paying job, and save heaps on tax and enable most/all deductions under the sun.

For anyone who thinks they can legally dodge the system through some 'skewed interpretation' of the law, you are mistaken. It would be interesting to see how many of the respondents here actually work/specialize in this field. If I'm not mistaken there's only 2.

[Kujotk]

I still don't believe that it is quite THAT easy to justify the 'contractor' reasons. Even though you can argue "now" that people are there to carry out indefinite tasks; I think upon closer observation (i.e. an audit), you'll become unstuck. If being classified as a contractor was that easy, everyone would do it. Why not? Set yourself up as a business, land yourself a high paying job, and save heaps on tax and enable most/all deductions under the sun.

For anyone who thinks they can legally dodge the system through some 'skewed interpretation' of the law, you are mistaken.

Good thing your not my business adviser, I got my audit reports back literally last thursday and everything is hunky dory.

And the reason not everybody classifies themselves as a subby is because the majority of people don't have the balls to leave a permanent 9-5 job or want to give up there permanent wage to risk it all when if you make a wrong desicion you can end up broke and bankrupt in a matter of weeks. Most people don't have the guts to take a risk, and those are the people that spend there whole life pretending they are happy at their job, working for somebody else, being told what to do, struggling to pay of there only house for 30years.

2% of people take the risk of doing their own thing, 1% fail, the other 1% flourish.

you get out of life what you make of it, 9 months ago I posted my r33 for sale on the for sale thread to raise funds, I was going to downgrade to something cheaper as I was in a dead end job performing pathology tests and making a medical company gross billions while I was basically going backwards financially. I left that place and started my own thing, today I couldn't be happier, not just for financial security, but also generally happier being able to do what I like when i like. The people that know me in person know what ive gone through and where i'm at today. Theres a few people on these forums who know a tiny bit about how i'm going business wise, and when they read this i'm pretty sure they'll believe what I have said on this topic is pretty trustworthy purely because ive done it and they have seen the rewards, I haven't just talked about theory from text books or sat behind the PC telling everybody they are wrong, but not going out for themselves and actually seeing what the real world is like.

Take it or leave it, if you don't think I am right by basically saying there are legal ways around these so called "concrete laws" then good for you and good luck to you.