Cash-in-hand jobs – otherwise known to tradies as ‘cashies’ – are a popular way to charge for jobs ‘off the books.’ There’s no invoicing, no lengthy payment terms and most importantly, no tax charged on these payments. Basically, they’re a tradies dream come true! However, if it sounds too good to be true, sadly, it probably is.

Here is what you need to know about cash-in-hand jobs and how they can affect your business.

What’s so good about cash-in-hand jobs?

Tradies are often seen as on-call handymen for their family and friends. The odd jobs and renovations around the house are asked with an added “it’s all good, I’ll give you cash for it” tacked on the end. It really is good because having some spare cash that you don’t have to pay tax on is a bonus when added to your regular salary.

Cash is a legal form of tender and saves tradies from chasing invoices down the track. This instant payment allows them to pay for supplies and pay their workers and any other day-to-day expenses. Some clients may even offer cash-in-hand payments in the hope of a discount on the price. It is entirely legal for you to complete a job, send an invoice and receive your payment in cash. If you declare the payment as income and record the job on your books, you can accept cash for work.

What’s not so good about cash-in-hand jobs?

The issue that arises from cash-in-hand payments is if tradies are taking cash payments to avoid paying tax, i.e., GST (general sales tax). This is illegal and is essentially the commission of a fraud. This would typically involve the tradie offering a discount in place of GST. As the income isn’t declared, there is no official way to measure cash jobs. However, it’s estimated that cashies account for3% of gross domestic product (GDP) or 50 billion dollars per year.

Tradies who opt to complete cash-in-hand work to increase their income without the authorities knowing are breaking the law. Some other problems with not correctly reporting this type of work can include:

Difficulty managing expenses and tracking results – If you or your employees are completing cash jobs but not taking the time to go through the proper processes, managing and tracking your incoming and outgoing expenses will become challenging. It also makes it hard to track your sales results to visualise if your business is growing and making a profit.

Exposing your business to risk – Ignoring correct protocols means exposing yourself and your business to risk. If your employees are taking cash payments on your behalf that you’re unaware of, your company could be threatened if authorities find out about these methods. It also means you’re not fully across the income your employees are pocketing.

Warranties – As there is no paper trail or evidence of the transaction, failure to record a cash payment also works against the customer. If something were to go wrong with the work done for them, they aren’t protected under warranty, as the transaction isn’t ‘legitimate’.

Undervaluing your business – Unrecorded cash payments technically “don’t exist”. If you ever wanted to sell your business, these unrecorded payments would undervalue your company’sworth – and potentially by a lot! Any prospective buyers would pay less for it as you’ve given them no reason to pay more.

Not covered by insurance – Lastly and likely one of the most important problems to address is undeclared cash payments are generally not covered by insurance. If something were to go wrong and your clients were to hold you accountable, this could cause some big headaches for you and your business.

Do I have to declare cash-in-hand jobs at tax time?

Put simply, yes! Any cash payment jobs you or your business completes must be declared at tax time and recorded on the books. As stated above, it’s not illegal to get paid in cash, but it is unlawful to make a false declarationto the government. If you’re unsure how to record these payments, it’s best to speak to a financial advisor.

To protect yourself when completing cash payments, here are a few tips:

• Get a receipt/invoice for each payment you make – this ensures there’s a paper trail.
• Make sure any invoice you receive has the words ‘tax invoice’ and the business’s ABN or NZBN clearly stated.
• Have a contract drawn up for your job, with the contract price (GST inclusive) clearly stated.
• Ensure that the tradie or business you’re dealing with is registered with an ABN or NZBN and has the appropriate trade license if required.
• Consider what legislation and regulations apply in your area. If it’s a large job, there may be a schedule of progress payments that you are contractually obliged to meet.

What happens if I’m getting paid cash-in-hand by my employer?

Getting paid cash is completely legal and doesn’t mean your employer is doing anything dodgy. It may be a more convenient way to pay their employees for some businesses. However, some employers will pay their employees cash-in-hand to avoid tax and employment responsibilities.

If your employer is paying you cash, you:

• Must declare the cash as income when you lodge your tax return.
• Should still receive a payslip showing all your earnings and the amount of tax your employer takes out.
• Should receive an income statement at the end of the income year that shows your total earnings and the amount of tax your employer takes out.
• Should check your employer is making super contributions.
• Should check your employer is paying (at least) the correct award wages (click here and here for New Zealand.)
• Should check your employer is taking tax out of your pay – this helps to make sure you don’t end up with a large tax bill.
• Should check your employer’s workers' compensation insurance covers you in case of an accident.

If you’re worried that your employer isn’t paying your wage correctly, it’s important to speak with them to clarify any confusion.

Cash-in-hand payments are often a tempting form of work for tradies. These payments require less paperwork and don’t involve chasing invoices from your client. It’s also possible to make a little extra money as the payment comes to you before tax. However, it’s crucial to follow the correct processes to report this form of income when receiving cash for work. Failure to do so can lead to severe implications for your business.

Use your next cashie job to purchase yourself some new gear for onsite. Head into your closest Syzmik stockist today.