ATO warns small businesses it will come knocking in 2018, after netting $1.8 million from random Melbourne audits

SmartCompany, December 12, 2017

The Australian Taxation Office is maintaining its scrutiny of businesses that deal in large amounts of cash, with reports it has recouped millions from smaller operators after a series of random audits across Melbourne.

The Whitehorse Leader reports a “blitz” on businesses in the eastern Melbourne suburb of Box Hill has seen $1.8 million been repaid in outstanding tax bills and penalties after more than 130 businesses received a knock on the door from the tax man earlier this year. Around $8 million in unreported payments were reportedly uncovered during the visits.

Thirty-one of the businesses were audited, with the ATO saying it had chosen Box Hill and neighbouring suburb Glen Waverley as a focus given businesses in these suburbs demonstrated “high cash economy risk behaviours”, reports Leader. 

The tax office is continuing to target beauty salons, restaurants and cafes suspected of dealing in large volumes of cash, with Commissioner of Taxation Chris Jordan saying last month a focus on businesses with “low use of merchant banking facilities” were one of five target areas for the rest of his tenure.

Hundreds of businesses have received similar knocks on the door from the tax office this year, as the Black Economy taskforce continues its efforts to recoup an estimated $24 billion lost annually through activities such as the incorrect reporting of business income.

The ATO tells SmartCompany this morning that site visits of this nature have wrapped up for 2017, but warns businesses should not relax given auditing activities are happening at all times and reviews of cash-based businesses will resume again in the new year.

“Specific location visits have concluded for 2017 and will recommence early in 2018, however the ATO has a range of ongoing compliance activities underway at all times, including reviews and audits, as part of our work to protect honest businesses from those who might be trying to seek an unfair advantage by avoiding their tax and super obligations,” a spokesperson said this morning.

Earlier this month, Chris Jordan warned businesses that cash-heavy operators remain in the firing line, and cited a number of common breaches that the office is on the lookout for.

These include cash registers that don’t have till tapes, transaction records that show a large number of “no sale” or voided transactions and the use of a wallet as a cash drawer.

Jordan also said visits to businesses throughout 2017 revealed a number of operators who were running businesses despite not having proper ABN or GST registrations.

The ATO told SmartCompany this morning there are a few key pieces of information business owners should know in the event that auditors come knocking. In the first instance, business owners are reminded to ask anyone showing up on their doorstep for proof of their official status.

“ATO officers carry identification which they will produce during the visit. An ATO officer may ask for information, for example in regards to your record-keeping or number of employees,” an ATO spokesperson said this morning.

Business owners should have all their documents at the ready, but the tax office says businesses will be given time to get materials together upon request.

“They [officers] will generally not ask you to hand over records during the initial visit,” the spokesperson confirmed.

Thirdly, small business owners should know that a visit from the tax office does not automatically signal a big problem. Rather, business owners should remember the purpose of any visits is to work out whether there needs to be a future conversation about compliance, the ATO says.

“Visiting businesses in person is about helping them to meet their obligations. Through the visits we can quickly identify who needs extra support, who may need to be engaged in a different way and make it easier for them to comply,” an ATO spokesperson told SmartCompany.