Leaving a tip is a much more compicated transaction than you may have ever imagined as poor regulation has created a moral minefield that needs to be carefully navigated.

In the eyes of the law, what exactly is a tip?  

Not long ago, tipping was considered an American custom, but it is now common practice here. It's on the rise in synch with the explosion of Australia's dining culture in general. It seems pretty straightforward: happy customers might leave a little extra payment at the end of the night as a thank you for excellent service.   

Patrons do this with the expectation that the person they leave the tip for receives it, but this is not always the case.  

Tips are classed as earnings and should be listed as additional benefits on one's income tax return. Now, I'm not naming any names, but I worked as a waitress whilst putting myself through university and I would be very surprised if the ATO had any statistics showing that this practice is dutifully followed by the majority of hospitality workers.  

People aren't declaring their tips, so that money then exists outside the grid.  

Probably because it doesn't show up in the paperwork, this section of the economy has been left completely unregulated. There is no national legislation, and no state or territory laws I know of (although I'd be happy to be corrected) that addresses the issue of who tips belong to.