The Australian Tax Office is running national campaigns targeting three “high-risk” industry groups – restaurants and cafes, building trades and hair and beauty, in a bid to bring billions of dollars back into the tax net.
The tax office is targeting hundreds of thousands of businesses to root out cheats in a booming cash economy.
One financial peak body is urging the Federal Government to introduce new rules to deny ABN numbers to repeat dodgers, making it hard for them to set up new businesses, and even punish consumers who take part in discount-for-cash deals as part of a crackdown.
But a hospitality industry boss says minimum wages and penalty rates for workers are encouraging some operators to break the law.
The scale of the hidden economy is difficult to gauge, with previous studies suggesting it could be costing anywhere between $5 billion and $22 billion a year in lost GST, business tax, PAYE and superannuation contributions.
Special programs have been running in areas with high numbers of Asian business, particularly with ‘Cash only’ businesses.
Data-matching has identified 275,000 businesses flagged as potentially under-disclosing income.
Restaurant and Catering Australia chief executive John Hart said his organisation had been working with the ATO on an educational campaign to ensure cafe and restaurant operators were aware of their obligations and complied.
But he said he did not think the problem “is anywhere near their expectations” because increased use of technology meant cash comprised only 15 per cent of business in the industry now.
Mr Hart said most non-compliance was due to the complexity of the tax system rather than an intention to cheat.
He believes there is a nexus between high penalty rates for workers in the hospitality sector and the risk of tax cheating.
“The more expensive it is to operate a business and the closer the complexity pushes a business to the edge, the more likely it is that a business will not comply.”
Chartered Accountants Australia and New Zealand head of tax Michael Croker said: “There are no ifs, buts or maybes.”
“If you are dealing in the cash economy, you are a crook.”
Chartered Accountants has proposed an amnesty for people to declare unpaid tax without prosecution and fact reduced penalties such as 10 per cent of the shortfall.
But that “never-to-be-repeated” offer should be followed by even tougher penalties including sanctions such as good behaviour bonds payable to the ATO and withholding ABNs for a certain time.
It was also essential to change the attitude of the public who were often happy to go along with the cash-in-hand approach.
“Cheating the tax man is seen as a victimless crime but when you are old and trying to get a bed in a nursing home and there’s no government funding, then it is a different matter.”
Mr Croker suggests if people benefit from the hidden economy by, for example, paying their rent in cash to get a discount, then perhaps they should be denied access to tenants’ rights legislation or insurance protection.
The ATO‘s top tax targets are:
- Cafes and restaurants
- Hair, beauty and nail services
- Cleaning services
- Carpentry
- Electrical
- House construction
- Painting and decorating
- Plumbing
- Road freight
- Waste skips
The ATO has been tackling this issue for a while now and is committed to maintaining honest and fair trading in the industry. Businesses that don’t report income or pay cash-in hand wages to avoid tax or super, gain an unfair advantage over their competitors.
Here is what the ATO will be looking out for:
- Lifestyle and spending habits that outweigh business income.
- Compare businesses against the small business benchmarks.
- Review third party information such as bank transactions, and compare it to what businesses have reported.
- Investigate information provided by employees and the community.
If you’ve made a mistake, you should fix it straight away by making a voluntary disclosure or you can contact your tax advisor for help to correct it.
To always ensure that you keep your tax records up to date and accurate, get in touch with the team here at Fortis Accounting Partners. You can reach us on 02 9267 0108, or via info@exemplary-financial.flywheelsites.com.
