Recently the hospitality industry in Queenstown was under the Inland Revenue spotlight and now tradies are the centre of attention. In their Get It Right campaign, the IRD has warned that tradies who do undeclared cash jobs could be hit with penalties or convictions.
Cash leaves a trail
Cash jobs leave a trail that the Inland Revenue can follow and they say: “If two tradies work together and one declares a job the other doesn’t, they can be dobbed in without realising it. If we audit one person, it might indicate another business or contractor that needs to be audited. Also, there’s always a chance of a random audit.
“We can see when tradies buy supplies, such as paint, carpet or timber, without a corresponding declared job. We can also access information held by other Government departments, banks, loyalty cards, casinos, and many other organisations to make sure all income is being declared.”
Why declare all income?
It’s not just the risk of getting caught, with hefty fines and criminal convictions, there are other reasons why you may want to reconsider doing work ‘under the table’:
- Doing cash jobs may undermine your reputation in the construction industry. Cash work is often associated with cheap work, not necessarily what you want to be known for.
- Your accounts will show that your income is lower than it should be, making it harder to get a bank loan.
- Not paying your fair share of tax can be considered a ‘rip off’ to society.
- You and your client have no record of work carried out.
Getting it right
To stay above the law, make sure that:
- you record every job, no matter how big or small. Doing jobs for cash or for your mates is okay – as long as you record them and declare the income when you’re filing your annual tax return.
- if you’re registered for GST, you charge it. You must register for GST when your annual turnover is more than $60,000.
- you register your employees.
- you declare all your income when you file your tax return.
Fixing past records
It’s not too late if you’ve left income off past records. You can make a full voluntary disclosure to the Inland Revenue and have your shortfall penalty reduced by up to 100% and avoid prosecution.
If you’d like advice on making a voluntary disclosure or any accounting-related matters for your trades business, whether it’s how to keep better accounting records, managing your cashflow or job management apps, please get in touch.