Damon Mcknight
In Australia, the term cash economy refers to businesses that deliberately hide income from cash or electronic transactions to avoid paying taxes. While there are legal ways to hide money from the government, such as investing in precious metals or using prepaid gift cards, it is important to note that hiding cash from the government may be illegal and have consequences. This article will explore the various methods and strategies individuals and businesses use to conceal their cash from the Australian government and the potential risks involved. We will also discuss the government's efforts to address the hidden economy and the steps individuals can take to protect their assets legally.
| Characteristics | Values |
|---|---|
| Definition of cash economy | Businesses that deliberately hide income to avoid paying the right amount of tax or superannuation, which they mainly do by not recording or reporting all of their cash or electronic transactions |
| Prevalence | More likely to occur in the small business market segment, where approximately 1.6 million small businesses operating across 233 industries are more likely to have regular access to cash |
| Management | Managed by approximately 400 ATO staff, with a budget of $39.5 million in 2015–16 |
| Average annual liabilities raised by the ATO from compliance activities with small business taxpayers to address the cash economy | $192.6 million |
| Average annual cash collected by the ATO from compliance activities with small business taxpayers to address the cash economy | $114 million |
| Referrals received by the cash economy risk and strategy team in the last two years (2013–14 and 2014–15) | 21,683 |
| Sources of referrals | The ATO’s Tax Evasion Reporting Centre, other ATO business lines, ministerial correspondence, and government agencies such as the Australian Federal Police |
| Treatment of referrals | Treated on a case-by-case basis, with only high-priority referrals being actioned while medium and low-priority referrals can be used to guide treatment strategies for specific industries |
| Strategies to hide money to improve the age pension | Invest in an existing home, as any money spent on improving or repairing it will become part of its value and be exempt from Centrelink tests; hide money in a younger spouse's superannuation, as it will be fully exempt from any test until they become eligible for the Age Pension |
| Ways to avoid paying taxes legally | Purchase precious metals such as gold, silver, and platinum in bullion or coin form, use prepaid gift cards or foreign debit cards that operate outside of PATRIOT Act jurisdiction |
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What You'll Learn
Invest in precious metals like gold, silver, and platinum
Investing in precious metals like gold, silver, and platinum is a good way to diversify an investor's portfolio and can act as a hedge against inflation. They are also considered "safe-haven assets" and are often favoured by investors during times of economic uncertainty.
Gold and silver are the most well-known precious metals, mainly due to their use in art, jewellery, and coinage. Platinum is also a popular investment option and is the most widely traded of the platinum group metals. Other platinum group metals include ruthenium, rhodium, palladium, osmium, and iridium.
There are several ways to invest in precious metals. One way is to buy them physically in the form of coins, bars, or jewellery. However, this method may not be ideal as it requires secure storage facilities to prevent theft, misplacement, or confiscation. Instead, investors can now buy certificates, exchange-traded funds (ETFs), close-ended bullion funds, and futures funds, which are easier to manage and provide more flexibility.
When investing in precious metals, it is important to buy from reputable local dealers who will allow you to examine the metal before purchase. Online sellers are also a good option as they often offer lower prices due to reduced overhead expenses. It is recommended to avoid TV dealers, gold shows, and individuals claiming to own precious metal mines, as their offers may be of dubious investment value and difficult to verify.
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Use prepaid gift cards to stash cash
Prepaid gift cards are a popular method for businesses to reward and incentivise employees and customers. They can be used to streamline expenses, tenure/milestone awards, gifts, promotions, and more. Prepaid cards can be ordered and loaded with different amounts of money, and they are compatible with Apple Pay, Google Pay, and Samsung Pay. They can also be sent via post, courier, email, or SMS delivery.
Prepaid gift cards offer global acceptance, security, and customisation options. For example, you can add your company logo to the card or fully customise the design. The cards can be used anywhere that Mastercard, Visa, or eftpos is accepted, providing flexibility for the recipient to choose from millions of retailers and service providers worldwide.
One advantage of prepaid gift cards is that they can be used to control spending. You can determine where, when, and how the card can be spent, and cardholders can only spend what has been loaded onto the card. This makes it a good option for businesses to disburse emergency funds.
In Australia, you can select the value to be loaded onto the card, with limits of up to $9,999 for Mastercard and Visa and $1,000 for eftpos. There are also prepaid travel cards that can be loaded with smaller amounts, such as between $20 and $500, which can be used anywhere that Mastercard is accepted.
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Hide money in a younger spouse's superannuation fund
If you are approaching the Age Pension age and your spouse is several years younger, one strategy to hide money is to put it into their superannuation fund. This is a viable option until your younger spouse becomes eligible for the Age Pension, at which point the balance of the superannuation fund will be fully exempt from any test. However, it is best to plan this well in advance, as it can become complicated if you are already close to applying for the Age Pension. It is important to be aware of the superannuation rules, limits, and possible costs associated with this strategy. For instance, you must be married or in a de facto relationship, and both of you must be Australian residents. Additionally, your spouse must be under 75 years old to be eligible to receive spouse contributions.
The Australian Taxation Office (ATO) defines the cash and hidden economy as businesses deliberately hiding income from cash or electronic transactions to avoid paying taxes or superannuation obligations. To address this, the ATO has a team dedicated to identifying potential cash economy cases by data matching using its data and third-party sources, such as merchant data and online retail sites. Therefore, it is essential to understand the legal implications and risks associated with hiding money in your spouse's superannuation fund.
To ensure you are adhering to the rules and minimising any potential risks, it is recommended to seek financial advice before implementing this strategy. A financial advisor can guide you through the process, taking into account your specific circumstances, contribution caps, and tax issues. They can also help you navigate the complexities of reshuffling superannuation money between partners, ensuring you don't breach any limits.
While hiding money in a younger spouse's superannuation fund can be a strategy to improve your Age Pension, it is important to remember that this may come with certain trade-offs. For example, the money in the superannuation fund will be subject to a 15% superannuation tax, whereas a pension environment is typically tax-free. Therefore, it is crucial to carefully consider all aspects and seek professional advice before proceeding.
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Invest spare cash in your home to increase its value
If you're looking to increase the value of your home in Australia, there are several strategies you can employ. Making strategic upgrades and renovations is a direct way to boost your property's value. Here are some ways to invest spare cash in your home to increase its value:
Renovations and Upgrades
Focus on areas that provide the maximum return on investment (ROI). Kitchens, bathrooms, and outdoor living spaces often influence buyers the most. For example, consider modernising your kitchen or updating your bathrooms. Additionally, look into energy-efficient appliances, which can help reduce ongoing costs such as electricity and water bills, making your home more attractive to potential buyers.
Property Maintenance
Regular maintenance tasks are essential to keep your home in good condition. Properly maintained homes are more appealing to buyers. This can include restorative work to preserve any historical charm or period features.
Location and Amenities
While you cannot change your home's location, emphasising its positive features, such as proximity to city centres, quality schools, public transport hubs, beaches, and shopping hubs, can add value. Highlight these features in your advertising materials to make your property more desirable.
Space and Size
Effective use of space and larger properties often command higher prices. Consider ways to maximise the usable space in your home, as this can positively impact its value.
Planning and Zoning
Stay informed about local council plans and zoning regulations. Zoning that allows for commercial use or multi-storey developments can add significant value to your property.
It's important to remember that any money spent on improving or repairing your home will become part of its value. Carefully consider the cost versus benefit of each project and how it aligns with your financial goals. Additionally, consult with specialists to ensure you make informed decisions about investing your spare cash in your home.
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Use a savings account or term deposit to grow your money
While hiding cash from the government is not recommended and may even be illegal, there are ways to protect your privacy and reduce the appearance of large sums of money. One method is to utilise a savings account or term deposit to grow your money while keeping it out of plain sight. Here are some detailed strategies to consider:
Open a savings account that offers high interest and minimal fees. Look for accounts that provide bonus interest for regular deposits, helping your money grow faster. Ensure that the account has a high interest rate applied to all balances, not just an introductory rate that will eventually drop. Consider accounts with no monthly fees and no minimum deposit requirements, giving you flexibility and ensuring your money isn't wasted on unnecessary charges. Regularly depositing small to medium amounts into this account will help grow your savings over time without raising too much attention.
Another option is to utilise term deposits, which can offer higher interest rates than standard savings accounts. Term deposits lock away your money for a fixed period, usually between one month and five years, with longer periods often resulting in higher interest rates. This strategy can be an effective way to save a large sum of money for a future expense while also reducing its visibility. Ensure you are aware of any penalties for early withdrawal, and consider using a 'ladder' strategy, where you have multiple term deposits maturing at different times, giving you access to funds regularly.
To further grow your money, consider using a tax-effective savings strategy. In Australia, the government encourages individuals to save through schemes like the First Home Super Saver Scheme (FHSSS), which allows you to save for your first home using your superannuation. This strategy can help you save faster with the benefit of concessional tax treatment. You can also look into tax-effective investments, such as Australian shares or property, which can provide tax advantages through negative gearing or the ability to claim deductions on expenses.
Additionally, privacy is an important consideration when trying to keep your savings out of the spotlight. Look for savings accounts or term deposits that offer a high level of privacy and security. Some banks may offer features like two-factor authentication and privacy settings that allow you to control who has access to your account information. By keeping your financial information secure and limiting access, you can reduce the chances of your savings becoming common knowledge.
Remember, while these strategies can help you save and grow your money, it's essential to stay within legal boundaries and seek professional advice when necessary.
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Frequently asked questions
Hiding cash from the government is illegal and can result in severe consequences. However, if you are looking for legal ways to protect your assets, you can consider investing in precious metals such as gold, silver, or platinum, or using prepaid gift cards to store your money anonymously.
The Australian Taxation Office (ATO) defines the cash economy as businesses that deliberately hide income from cash or electronic transactions to avoid paying taxes or superannuation obligations.
The ATO has identified the cash economy as a major tax integrity risk and has allocated resources to manage it, including approximately 400 staff and a budget of $39.5 million in 2015-16. They also undertake data matching and use community referrals to identify potential cases.
Yes, one strategy is to "hide" money in a younger spouse's superannuation fund, as it will be fully exempt from any tests until they are eligible for an age pension. Another option is to invest in your existing home, as money spent on improvements or repairs becomes part of its value and is exempt from Centrelink tests.
Hiding cash at home, such as under your mattress, can make it more susceptible to theft or damage. Bank deposits in Australia are covered by the government guarantee scheme, which insures savings accounts and term deposits up to $250,000 per person, per institution.
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