The Cash Economy
The ATO is targeting businesses that are not declaring cash revenues
The Tax Office is cracking down on the black economy, targeting businesses that are not declaring cash revenues, from restaurants through to home cleaners. Deliberately hiding income from the ATO to avoid paying tax is also called cash economy.
In a quest to bring back billions of dollars into the tax net, the ATO this financial year is focusing on audits of small businesses including cafes, carpentry and electrical services, hair and beauty specialists, building trades and waste skip operators.
Cash still remains the most used payment method for many transactions, which causes the biggest issue for tax agencies worldwide.
In an attempt to capture more information on cash economy businesses, the data matching system of the ATO is increasingly getting more sophisticated. The tax office is now capable of collecting information from a number of external sources such as banks, employers, government departments and industry suppliers. These details are then compared against the income reported to the ATO by the businesses.
Major purchases such as cars and property can also be obtained by the ATO and reviewed as part of the data matching program.
Aside the bid to increase the tax net, this focus on the cash economy can also benefit honest small businesses by levelling the playing field, more fair competition.
But those who willingly take part in the cash economy should know what they are doing is illegal and there can be harsh consequences. Last year the ATO recouped $200 million through 10,000 audits of business that were found to be hiding cash transactions. In addition, the ATO prosecuted 41 people and nine firms for $3.2 million worth of cash economy offences. As an example, a Perth tiler was fined $64,000 for making cash deals.
The ATO is always perfecting and increasing their data knowledge base on every business in the country, so it will be harder for those wanting to choose a life of illegal actions to fly under the radar.
Submitted by: Harry Multani- Accountant