ATO business visits uncover some lax taxation habits

The ATO has been visiting businesses across Australia as part of its ongoing focus on the cash and hidden economy, a campaign it has dubbed Protecting honest business. In particular, it has been focusing on businesses advertising “cash-only” or dealing mainly in cash.

The name of its campaign refers to the unfair advantage these cash operators have over those who declare their income and do the right thing. The ATO says it aims to protect honest businesses from this unfair competition.

The ATO has also been focusing on businesses that:

  • its 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 superannuation or employer obligations
  • operate outside the normal small business benchmarks for their industry
  • are reported to the ATO by the community for potential tax evasion (it says the number of reports it receives shows that the community is less tolerant of unfair practices in these industries).

From a lot of these ATO visits around the country, it found businesses that:

  • don’t have separate business and personal bank accounts
  • don’t record all sales or keep proper books
  • had friends, family and other employees working “off the books”

The ATO says that there are a number of things that cause small businesses to fold, and high on that list is poor record keeping.

More than half of the businesses the ATO visited in its Protecting honest business campaign were found to be in need of an improvement to their record keeping. Issues the ATO found included businesses:

  • estimating their sales and income
  • using the “no sale” and “void” button on cash registers when taking cash payments
  • not keeping cash register tapes and not reconciling at the end of the day
  • paying their employees cash-in-hand.

The ATO says it will be writing to these businesses to recommend they attend one of its record keeping workshops. The workshops cover why good record keeping is important and how it will save them time.

If you have clients who need to improve their record keeping, let them know about the ATO workshops. These are held in every state and territory and on various dates. Details are here.

It is also keen to have more information about suspicious businesses, and asks if you or any of your clients have information, to report your concerns here.