Income Tax Laws and Practice

Running head: INCOME TAX LAWS AND PRACTICE
Income Tax Laws and Practice
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INCOME TAX LAWS AND PRACTICE1
Table of Contents
Introduction:...............................................................................................................................2
Overview of Black Economy:....................................................................................................2
Overview of Sharing Economy:.................................................................................................3
Sharing economy business model and traditional business model:...........................................4
Digital transportation business model (Uber):.......................................................................5
Traditional Taxation System (Taxi).......................................................................................6
Key differences between the two business models that effect taxation outcome:.....................7
Tax consequences under existing Australian tax law................................................................9
Conclusion:..............................................................................................................................10
References:...............................................................................................................................11

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Introduction:
The black economy taskforce was set during December 2016 with the objective of
developing forward looking, multi-prolonged policy so that it can combat the Australian lack
economy. In the final report of the black economy taskforce, it has highlighted the harm
which black economy is causing to business in Australia and community. It penalises the
taxpayers that are honest, reduces the integrity of the Australian taxation system and welfare
system (Cannon & Summers, 2014). The black economy results in unfair grounds for a large
number of small business that are doing things correctly. The impact is also currently
experienced by several businesses in Australia and consumers and those that are operating
under the sharing economy.
In recent years, there has been a strong growth in sharing economy, it facilitates
innovation, growth in job and more choice for the customers. During the consultation, the
task force perceived that as the sharing economy grows in terms of size there is an increasing
amount of risks that sellers might not be paying correct amount of tax (Wallsten, 2015). This
probable underpayment of tax weakens the benefits that sharing economy to the customers
and business and forms an unfair playing field for those that are doing things in the correct
manner.
The ATO has set up arrangement with some of the platforms so that it can obtain
information under its current information collecting powers (Posen, 2015). Data collection
under the ride sourcing sector has allowed ATO to take preventive steps which helps drivers
in understanding and complying with their tax reporting obligations.
Overview of Black Economy:
Black economy implies people that are completely operating out of tax and regulatory
system. It consist of wide ranging practices such as under reporting of takings, payments and

INCOME TAX LAWS AND PRACTICE3
accepting cash wages by not recording in the books of accounts, welfare funds, contractors
operating in sharing economy. Majority of the of the Australians thinks that under a level
playing field and feel it is unfair for the others obtain the competitive advantage by
deliberately doing illegal things (Rauch & Schleicher, 2015). The black economy is
constantly changing its forms and it is regularly supported by the incorrect assumptions that
taking part in black economy is a victimless crime. This includes the employers ill-treating
their workers and not paying them what they are actually authorised to. It includes businesses
that are dishonest and does not pay tax or superannuation to undercut their competitors.
Criminals that are operating in business models out of the tax regulatory systems.
This ultimately creates pressure on the Australians that are doing things in a correct way.
It also creates a greater effect on the community by lowering the funds for crucial facilities
such as health, education, transport and infrastructure and community services (Slee, 2017).
The black economy is not only restricted to tax issues but it is also very difficult, multi-
faceted occurrence that operates across Australia’s office relations, monetary wellbeing,
earnings and migration system. Some of the black economy behaviours includes;
a. Demanding for cash wages to paid in hand in order to avoid obligations
b. Under-reporting or non-reporting of earnings
c. Bypassing visa restrictions and fraud
d. AGN, GST and levy fraud.
e. Sham contracting
Overview of Sharing Economy:
The word “sharing economy” defines use of internet applications by people to rent out
their property, resources, skills and timing (Schor, 2016). Sharing economy platform permits
the users to monetise the work of excess volume in the use of assets or labour. Examples of