A recent interview with Tax Commissioner Chris Jordan revealed the ATO will be targeting businesses that deal in cash. As a part of its cash and hidden economy operation, the ATO has compiled “data-maps” of cash-only businesses and those that do not frequently or readily use electronic payment facilities. Using the data-maps the ATO is honing in on particular suburbs which have a high incidence of cash-only businesses.
- whether the business has undeclared income;
- where the employees are allowed to work (visits in the past have been made in conjunction with the Fair Work Commission or the Department of Immigration); and
- whether the employees are receiving the correct amount of wages, conditions and superannuation.
Therefore, the other areas the ATO is targeting this tax time also include unpaid superannuation guarantee contributions and cash payments of wages without the associated conditions and benefits.
Even if you’re not running what the ATO deems to be a “cash business” there are other areas you will still need to be aware of this tax time. In particular, the ATO will be looking at small businesses wrongly claiming private expenses, and unexplained wealth or lifestyle.
Under tax law, you can generally deduct a business expense if it is necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income, provided the expense is not capital, private or domestic.
The unexplained wealth or lifestyle targeted by the ATO includes instances of families who own businesses that have low or average reported incomes, but have a lifestyle that far exceed those modest incomes. Commissioner Jordan said the ATO will use all its resources including obtaining information from other government departments (i.e. Department of Immigration) and social media (i.e. Facebook posts).
If you are concerned the above may apply to you, or you’re thinking about moving away from cash and transitioning into electronic payments, we can assist you with this process.