Cash Jobs too Risky?

The Risks and Downsides of Cash Jobs


The Risks and Downsides of Cash Jobs

An area of the building industry which used to be standard business practice for some operators - cash jobs – has now become a focus for the Inland Revenue (IRD).

While some people might wonder what all the fuss is about cash jobs, there are many downsides associated with engaging in that sort of business practice. The first to lose out in the cash jobs stakes are every day New Zealanders.

Cash jobs aren’t declared as income which means that the IRD doesn’t receive income tax, ACC and GST payments on the amounts earned. If everybody operated on that basis it would quickly become a major problem, with the impact felt across all areas of society and the economy as a whole.

ACC Another issue is the effect that a lack of ACC payments made can have on you if you are injured while on the job. Pay-out’s by ACC are commonly based on a person’s previous year’s earnings. Cash jobs lead to under-reporting of income to the IRD. As a result, any payment arising from a workplace injury would fall short of actual earnings,potentially leading to serious financial hardship.

BEING AUDITED: The mere fact that the IRD is focussing on cash jobs is a problem in itself. Audits and reviews of those working in the construction sector is a costly exercise, even if no issues are found. Money spent on accountants, time away from work, stress and late nights can all take their toll. Cash job offenders can also expect to add to that shortfall penalties for not declaring income, interest and the actual tax amount owed. They can also expect to have a permanent ‘red flag’ linked to their name, leading to future problems whenever tax returns are reviewed by the IRD.

IS IT WORTH THE RISK? The New Zealand Herald recently reported that 57 per cent of cash jobs are initiated by the homeowner and 25 per cent of Auckland construction jobs are paid for off the books. While homeowners will often angle for a cash job as a way of getting a discount – it’s not their business that’s in the ‘firing line’. For those people who are considering a cash job offer, they need to carefully think through the risks. Ask yourself the following questions. Can I afford to go through an audit? Can I afford the potential issues and loss of income if I was injured? Do I want the gaze of the IRD permanently on my business? If the answer is ‘no’ - politely decline the offer and move on to the next ‘honest’ contract. Let someone else take on that risk, while you focus instead on legitimate work opportunities.

If you have any questions about this article, we recommend talking to your financial advisor or the team at Crowe Howarth. Better to be safe than sorry!

For the contract details of your local Crowe Howarth office click here.