Protect your Business from the Cash Economy
Running a small business is hard work.
The majority of small business owners are honest, hardworking and pay their tax obligations.
The reality is though, that there are businesses that operate in the cash and hidden economy. These businesses gain an unfair advantage over those who declare their income and do the right thing.
The ATO have declared that they aim to protect these honest businesses from this unfair competition.
The ATO are working closely with industry associations, tax practitioners and businesses themselves to understand any issues they may have.
By implementing up-to-date third-party data matching processes and utilising sophisticated risk-analysis they are confident that they can identify which businesses are vulnerable to the cash economy and may require intervention
The ATO have adopted the following procedures as part of this intervention strategy:
Identifying and Visiting Cash-Only Businesses
The ATO will focus on businesses that:
operate and advertise as 'cash only'
their data matching suggests they don’t take electronic payments
are part of an industry where cash payments are common
indicate unrealistic income relative to the assets and lifestyle of the business and its owner
fail to register for GST or lodge activity statements or tax returns
under-report transactions and income according to third-party data
fail to meet super or employer obligations
operate outside the normal small business benchmarks for their industry
are reported to us by the community for potential tax evasion – the number of reports we receive shows us that the community is less tolerant of unfair practices in these industries.
The data analysis and results from past visits have indicated to the ATO that there are more businesses in particular industries that have an unfair advantage.
These industries include but are not limited to:
Hair & Beauty Industry
Restaurant, Café, Takeaway and Catering Industry
Building and Construction Industry
This is not to say that whole industries are dishonest, rather that the above industries have a higher proportion of problematic reporting
The ATO have visited businesses across Australia as part of their ongoing focus on the cash and hidden economy. In particular, they are focusing on businesses advertising 'cash-only' or dealing mainly in cash.
Along with working with business and industry associations the ATO are also enlisting help from local authorities like Chambers of Commerce and Local Councils.
Their discussions will include:
The reason for the focus on cash
the benefits of electronic payment and record keeping facilities
community expectations of paying by card
What tools the ATO provides and demonstrations on how to use them, including online lodgment
making sure they're registered correctly
ensuring all businesses pay the correct amount of tax and super by declaring all their income and knowing what expenses they can claim
lodging their tax returns and activity statements
meeting their obligations if they are struggling, taking into account specific circumstances, and helping them get back on track
any other help they may need
If a business is found to be deliberately doing the wrong thing, action will be taken that could result in an audit or even prosecution.
The ATO is reinforcing to all small business owners that regardless of the type of business you run, if you are doing the right thing, there is no need for concern
Have you made a Mistake?
If you realise you've made a mistake, or have left something out, it's better to advise the ATO first. Reduced penalties may be applied, for example if you:
haven't declared income you have earned, including cash payments
claimed deductions you weren't entitled to
made any other statement to us that was false or misleading.
Know your Obligations
The ATO provide many tools and free workshops on record – keeping
Managing your small business records – how to meet your legal record-keeping requirements.
ATO podcast Tax inVoice Episode 10 – Good record keeping is good for business
Small business benchmarks – compare how your business is performing against others in your industry
If you are concerned with your record keeping, take the step today to make a change.
Call us on 07 5502 6673 and book in for a no obligation consultation and see how we can help you to stay on top of all your reporting obligations and help protect you from the cash – economy
Information obtained via www.ato.gov.au