23 July 2018

Cracking down on the black economy

The Turnbull Government’s plan for a stronger economy and more jobs is working. More than 1 million jobs have been created since the Liberal National government was elected.

The black economy is a threat to the livelihoods of honest Australians. The Black Economy Taskforce, established by the Turnbull Government, estimated that the black economy could be as large as 3 per cent of GDP in 2017, or approximately $50 billion a year.

The Black Economy Taskforce found that business competitors and fellow employees can be underbid by those who don’t comply with the taxation law and a range of regulations that include those governing immigration, workplace practices and state-based licensing rules.

The Minister for Revenue and Financial Services, the Hon Kelly O’Dwyer MP, today released exposure draft legislation for public consultation on the next tranche of measures aimed at tackling the black economy.

“Honest businesses meeting their tax and other obligations lose out to competitors doing the wrong thing and this encourages others to begin operating in the black economy in order to remain competitive,” said Minister O’Dwyer.

The exposure draft legislation for the first measure expands the taxable payment reporting system (TPRS) to three industries: road freight, security and information technology. Payments made to contractors by entities in these industries will have to be reported to the Australian Taxation Office.

The TPRS first applied to the building and construction industry and was extended to the courier and cleaning industries as announced in the 2017‑18 Budget.

The exposure draft legislation for the second measure removes tax deductibility for certain payments – including payment of wages and payments to contractors – if the entity making the payment fails to comply with its obligations to withhold and report information to the Commissioner of Taxation.

“Taken together, these measures are an important step to improve compliance with tax obligations and deter businesses from engaging in the black economy,” Minister O’Dwyer said.

This consultation builds on the Government’s strong actions to date, which include a $10,000 limit on cash transactions, a comprehensive strategy to combat illicit tobacco, reforms to the Australian Business Number system, restricting government procurement to businesses that have acceptable tax records, and $315 million in additional funding to the ATO to increase its enforcement activity against black economy behaviour.

Stakeholders are invited to comment on the exposure draft legislation and explanatory materials available for the expansion of the taxable payment reporting system (TPRS) and the removal of tax deductibility for certain payments on the Treasury website. Submissions close on Friday 17 August 2018.