Paying cash to labourers / workers ??

[Bluekiwi]

How does this work, how best to account for such things.

Such as paying my brother in law $100 / day to work with me on labouring jobs on the weekends ?
- so far I just withdraw the money and give it to him, and make a note of what I have done.
Should I have hime write up something for me.

What about my friend from work who is an electrician who has done some work for me in the evenings.
I am paying him $1,000 for work done and buying some of the materials.

Obviously how they account for this extra income is their own business.
I just want to know how I should do it for mine, as it does pop up now and then.

Plus things like feeding the workers, we had to spend $25 at Macka's and buy drinks from petrol staion to keep us going - I dont usually put these under the business but should I ???

[TheLiberalLeft]

Sounds Mickey Mouse to me. Either pay the BIL the $100/day and DO NOT record the fact, or if you insist on recording it and claiming as an expense, then you need to go the whole hog.

I assume the BIL is not billing you thru a separate company? But I assume that the electrician is, so that makes it two different things. The sparky is easy - if he's billing you for GST. Just record like any other expense.

But if the BIL is not a company, then he's your employee, and you're up for ACC for starters. And possibly kiwisaver. And organising his PAYE. The list goes on.

[One]

I've only ever done this for one-offs, mostly paying a student for casual labour. I typed up a receipt, got them to sign it and claimed it as an expense. I hope this was right!

Food on site's 50% deductable (or maybe it's 100% if onsite - i forget). I kept the receipts and claimed it.

[Tan]

My rule of thumb is that if they are not going to declare it I dont.
This means I have to know I am still better of by paying it out of my own pocket as opposed to running it through the trust holding my properties.

I know I am being overly cautious, but I don't feel it's worth the stress of being caught out .

All the hassle in TLL's last paragraph is reality. It's easier to pay a professional company sometimes.

[Ahar]

But if the BIL is not a company, then he's your employee, and you're up for ACC for starters. And possibly kiwisaver. And organising his PAYE. The list goes on.

My accountant told me that the worker only has to be "self employed" , not necessary to be a company. This way you are not up for ACC payments, PAYE etc.

This means you need to get some sort of agreement from your worker that he is indeed a "self employed contractor" and bill for work done....even if it's from a cheap invoice book from the $2 shop.

Then you can claim the expense.....and then its up to your tradie to declare this income.

[Bluekiwi]

I just dont want it to look like I am just taking out money from the trust, dont want it to look like I am stealing money, as I am not.
I prefer full GST invoices and paying through internet banking.
But sometimes for small jobs, where you are giving someone a little bit of manual work to earn a few dollars, they just want cash.

I will get the self employed contractors to write something up for me with all there details on it.

[TheLiberalLeft]

That'd probably work, Ahar, if them's the IRD rules, but in this case he might be setting his brother in law up for a fall if it's recorded & claimed, but the BIL assumes it's a cashie. You can't have it both ways sometimes, as Tan says.

[klauster]

Getting paid is a common issue. Nobody can force you to work without payments. Even the IRD likes it - income means tax, right?
If you claim expenses and pay a contractor (even cash), you are responsible to deduct withholding tax. If you pay your contractors from your pocket money and don’t tell anybody, you can’t claim anything.
So if you deal with DO-UP properties and not registered as employer or don’t pay contractors on invoice basis you have a lot of expenses you can’t claim ( you lose money).
The other consideration is an accident or insurance claim when somebody works on your property – business is about risk management.

[Tan]

Fair Go has an opinion

Former Fair Go presenter Kevin Milne is taking aim at tradesmen and their tax dodging offers of under-the-table work.
"My advice to anyone offered that sort of deal is to refuse.
"I don't see what's so bloody clever about a tradesman saying you can pay me cash and I won't pay tax on it. Bugger them," Milne said in his latest column in the Woman's Weekly.

Rest of article here
http://nz.finance.yahoo.com/news/Mil...18425.html?x=0

[Bob Kane]

"I don't see what's so bloody clever about a tradesman saying you can pay me cash and I won't pay tax on it. Bugger them," Milne said in his latest column in the Woman's Weekly.

Rest of article here
http://nz.finance.yahoo.com/news/Mil...18425.html?x=0

Hang on, I can pay a tradesman $700 or I can pay him $1000. My choice.
What would a clever bugger do?

[Tan]

Hang on, I can pay a tradesman $700 or I can pay him $1000. My choice.
What would a clever bugger do?

Depends if you are going to claim on it or not.

[drelly]

IMHO cashies aren't worth it. You'd need a big (50%-ish) discount off going rates to make it worth-while as you can't really claim it and people doing a casual cashy don't seem to have the same sense of responsibility.

[Wayne]

IMHO cashies aren't worth it. You'd need a big (50%-ish) discount off going rates to make it worth-while as you can't really claim it and people doing a casual cashy don't seem to have the same sense of responsibility.

I agree - can't be bothered really. They talk about a 15% reduction for the GST so the tradie claims the gst refund from the goods he buys and doesn't pay tax at all - big win for him and potential problem for me.

[Perry]

As I recall, amounts under a certain figure do not require
supporting documentation. That said, be wary of using
the Trust for such things, as it's holding the assets. If
you are the go-between and claim costs/reimbursements
from the Trust, the situation may be a little better.

Drelly has an oft-overlooked point. By the time loss of
deductibility and the other person's tax is taken into
account, plus the risk(!), 50% off the going rate seems
about a right amount.

Be very careful.

[MarkButThis]

BlueKiwi, it may sound like a weird statement, but ring the IRD and they will help you. Their customer service is quite special. I was pleasantly surprised by their help. They will help you pay exactly the right tax - not a penny more and not a penny less. I mean ring them about the macdonalds and the brother payments, not the cash job though. I'm not sure they'd be too helpful with that one. Perhaps wear a false beard when you call.

BTW - If I could give gold stars to companies for wonderful service, check out my top three...
- Waitakere Refuse Transfer - really helpful people there - I gave them a dozen beer simply because the service was so amazing.
- Waitakere and Auckland Council - Helpdesk is knowledgable and the duty planners are really helpful
- IRD

Strange but true.