Small businesses using cash has traditionally been a way to avoid paying taxes. Operating in the cash economy is a very risky decision and now the risk is only set to increase with the ATO set to use bank data to catch cash economy tax dodgers.
According to the ATO, cash economy activities include:
- Paying wages ‘cash-in-hand’ and not withholding any tax or superannuation.
- Skimming some or all of these cash takings.
- Running part of normal business activities ‘off-the-books’.
- Not reporting the value of goods and services provided in exchange for other goods and services.
- Operating underground- that is, avoiding tax and superannuation obligations by not registering the business or lodging returns.
The ATO will target small businesses in the cash economy through a data-matching program analysing the transactions of almost 1 million businesses. The ATO says data relating to about 900,000 merchants will be collected from the major banks and credit card providers and will be electronically matched with ATO records.
The tracking program is now in its’ fifth year and will enable the ATO to track down businesses that are operating in the illegal cash economy. Typically, this has been a difficult area for world tax authorities to trace because there are no proper records. More than 1.6 million small businesses in Australia have high volumes of cash transactions and these businesses will be targeted in an attempt to crack down on the cash economy.
The program works by matching the data provided by financial institutions against tax payer records to identify those who may not be meeting their registration, reporting, lodgement and payment obligations. The program identifies businesses that are not reporting income, or operating businesses that are not registered with the ATO. If your business is making unusually high numbers of transactions, but not reporting income to match, this will set off alarm bells. Traditional businesses are not the only ones to be targeted either, online businesses will also be targeted in an attempt to stop tax dodgers.
The ATO will be working with financial institutions such as Commonwealth Bank, Westpac, ANZ, American Express, Diners Club Australia and others will collect credit and debit card sales data between July 1, 2012 and June 30, 2014.
If you are unsure about your records, or think you might need assistance with your bookkeeping software implementation, please don’t hesitate to get in contact with the team here at Fortis Accounting Partners. You can reach us on 02 9267 0108, or via info@exemplary-financial.flywheelsites.com.
