Cash In Hand Tax Implications In Australia

Business Cash Payments On ATO’s Radar - 6 March 2018

Cash In Hand Tax Implications in Australia

Cash might be king, but the use of cash by businesses is attracting the ATO’s attention.

Third-party data and risk analysis is being used by the ATO to identify the types of businesses they will visit, and this time around, visits will not be limited to one particular industry.

In this competitive economic environment, some businesses are increasingly turning to cash payments to dodge their tax obligations. This is becoming such an issue that the ATO has started a program of visiting businesses across Australia that may be using cash inappropriately or operating in the hidden economy.

A wide variety of resources including third-party data and risk analysis will be used by the ATO to identify the type of businesses it will visit. These include businesses that:

  • operate and advertise as “cash only” or mainly deal in cash;
  • do not take electronic payments according to data-matching;
  • 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 and other employer obligations;
  • operate outside the normal small business benchmarks for their industry; and
  • are reported by the community for potential tax evasion.

A wide net is being cast to target all businesses that could potentially be avoiding their tax and superannuation obligations. During the visits, where there are suspicions of wrongdoing, the ATO will follow up, initially by a letter which could include recommendations such as:

  • lodging a voluntary disclosure to mitigate the risk of an audit or potential prosecution;
  • investing in an electronic payment and record keeping system to reduce the risk of mistakes and meet consumer preference; and
  • attending ATO record keeping information sessions.
  • In the last round of visits, three common issues of not having separate personal and business accounts, not recording all sales or keeping proper books, and having employees working off the books were found, and over 60% of businesses visited required corrective action.

The hair and beauty, restaurant, cafe, takeaway and catering, and the building and construction industries all reported an increase in timely lodgement of activity statements after being targeted by the ATO for specific attention.

As a part of the visits, the ATO will also be working with industry associations and local authorities to educate businesses on the use of electronic payment and record keeping facilities, online lodgment, superannuation obligations to employees, proper registration and meeting of obligations, and help with business specific issues.

Need Help?

To ensure that you and your businesses are not targeted under this operation, or that if you are targeted, you do not get a follow-up, the following broad suggestions may help:

  • deposit all cash payments into bank accounts;
  • keep evidence to support all income, expenses and lifestyle;
  • account for any stock used for private purposes; and
  • work out the performance of the business relative to other similar businesses in the same industry using the small business benchmarks.

If you are targeted by the ATO, think you might be targeted or just need help to review your situation, contact us today.

6 March 2018

Disclaimer: The information on this page is for general information purposes only and is not specific to any particular person or situation. There are many factors that may affect your particular circumstances. We advise that you contact Mathews Tax Lawyers before making any decisions.

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