ATO Assistant Commissioner Michael Hardy has recently given tax agents some insights on the ATO’s strategy on the cash economy, particularly in light ofÂ recent ‘door to door’ visits in the Haymarket area of Sydney (Yes, they rocked up at businesses and started asking questions!).
Here are the key points:
– The ATO’s position is that it is supporting honest businesses facing unfair competition from the cash and hidden economy
– The ATO’s program of work is not just confined to the Sydney CBD or just to restaurants. There are three Australia wide industry-based campaigns – hair and beauty, restaurants and cafÃ©s and the building trades – this is a serious audit campaign, it’s not just the old ‘trying to educate taxpayers’ routine
– ATO dataÂ analysis of the cash economy indicates that the following industry groups are high risk businesses:
– Building and industrial cleaning services
– CafÃ©s and restaurants
– Carpentry services
– Electrical services
– Hair, beauty and nail services
– House construction
– Painting and decorating services
– Plumbing services
-Â Road freight transport
– Waste skip operators
– We’ve all heard of businesses which keep ‘two sets of books’, now it’s ‘two EFTPOS machines’.Â Mr Hardy said:Â ‘We are also seeing businesses try to hide non-cash income by not declaring online sales or using second EFTPOS machines. One restaurant conceded over $700,000 in undeclared sales through a second EFTPOS terminal. That’s a pretty severe level of unfair competition for the other restaurants in the same suburb’. Needless to say, the ATO can data-match information obtained by banks aboutÂ transactions through EFTPOS terminals.
– While the ATO tries to resolve disputes, in those cases which have gone before the Adminstrative Appeals Tribunal where the ATO has used small business benchmarks as a basis for default assessments,Â the Tribunal has found that the benchmarks were a reasonable basis on which to prepare a default assessment. In prosecutions the Courts have delivered custodial sentences and community serviceÂ orders for business owners found not to have declared all of their income.
Main Point – if you take cash income and don’t declare it, and these amounts are ‘material’ enough, then your tax return figures will look different to the ATO’s industry benchmarks and you are in the firing line for an audit – BE SENSIBLE, BE PRUDENT, BE CAREFUL!!