Failing to declare some cash payments can land part-time pensioners in hot water with the taxman. While receiving remuneration in hard currency for a completed job is not always illegal, some cash-in-hand payments are positively frowned upon by the law.
What distinguishes the two is any attempt by the paying person or organisation to avoid declaring the sum and failing to take out the right amount of tax to forward to the Australian Taxation Office (ATO).
The ATO recognises that some employers will pay cash-in-hand in a bid to dodge their taxation and employee responsibilities. The office advises that if you are paid in cash you need to:
- be paid the correct award wages
- ensure you don't end up with a large tax bill because your employer hasn't taken tax out of your pay
- get the benefit of super contributions
- be covered by your employer's workers compensation insurance
- declare the cash as income when you lodge your tax return
- receive a pay slip showing all your earnings and the amount of tax taken out
- receive a payment summary at the end of the year setting out your full earnings for the year and the amount of tax deducted
- check that your employer is making super contributions on your behalf.
In addition, any tips or gratuities you receive, whether from a customer or a boss, must also be declared as income for taxation purposes. Gambling wins do not need to be declared, unless you are a professional punter.
If you are supplementing your retirement income with cash earnings from the ‘sharing economy’ or selling items or services online, these payments, in most cases, will also have to be declared.
The good news is that, if you are single, you can earn up to $82 a week before your Age Pension is reduced. If you are a couple receiving the Age Pension, it will be reduced only once your combined earnings exceed $146 a week.
Receiving cash that is not related to employment also has to be declared to the Department of Human Services (DHS) if you are receiving a government payment. Generally, a rare gift of cash or prize winnings do not have to be disclosed.
For more details on whether you need to declare a lump sum payment in an income test for welfare, visit the DHS website.
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