ARCA calls for Trump-style removal of tip taxes
Following in the newly minted US President’s footsteps, the Australian Restaurant & Cafe Association (ARCA) has called for taxes on tips to be removed.
With tipping on the rise in Australia, tax-exempt would put more money in the pockets of hospitality workers, says ARCA CEO Wes Lambert.
According to data from payments tech provider Zeller, the average gratuity payment rose by 25% to $25.20 over 2024.
Which is good news for some of Australia’s lowest earners.
“Many more young Australians, and Australians in general, would work in the hospitality industry if we were better able to publish to the world that you can do quite well working in restaurants and other hospitality businesses,” Lambert told SmartCompany.
Under the ARCA proposal, workers could refrain from declaring tips on their tax returns – a current requirement by the Australian Taxation Office (ATO).
Lambert says tax rules and employment regulations around tipping need to keep pace with industry changes.
“This is where Fair Work and the ATO and hospitality businesses need to get together,” he said.
According to Lambert the federal government should “take a firm position that this windfall, that is paid to servers, can be considered like every other windfall and not subject to income tax”.
The Albanese government has mooted reforms that compel employers — not customers — to pay their staff a fair and predictable wage. It has also criminalised wage theft, made changes to the definition of casual work, and expanded casual conversion pathways.
However, the changes ignore tips. This is most likely due to the affect removing tax on tips would have on the federal budget.
The Australian hospitality industry generates an estimated $100 billion annually, with gratuities to workers potentially reaching $3-$5 billion per year. Under ARCA’s proposed tax-free tipping policy, these gratuities would become untaxed income.
ARCA's proposal could act to boost worker morale.
It is “paramount” the federal government ensures “as many Australian youth are excited to work in that industry, and announcing no tax on tips is a great way to kick off a campaign to get more Australians into those jobs,” Lambert said.
Jonathan Jackson, 29th January 2025
