More than 400 SMEs to receive visits from the ATO as it ramps up focus on Australia’s cash economy

More than 400 small businesses across Perth and Canberra will soon receive a knock on the door from the tax man, as the Australian Taxation Office continues to crack down on operators in Australia’s cash economy.

Assistant taxation commissioner Tom Wheeler says tax officers will be dropping in on hundreds of restaurants, cafes, hair and beauty salons and other small businesses that have ready access to cash next month to make sure their business registrations are up to date.

Those found to be non-compliant will have action taken against them, potentially in the form of audits.

“Local visits and interactions provide one-on-one education with small businesses about the tools and information they need to correctly register, lodge on time, maintain accurate business records, and correct any mistakes,” an ATO spokesperson told SmartCompany this morning.

“We also collect data during visits, which we may later use for audit purposes with businesses that are doing the wrong thing.”

Assistant Commissioner Wheeler says education is the first step to ensuring compliance.

“Visiting these businesses in person is about helping them to meet their obligations. Through the visits we can quickly identify who needs extra support and make it easier for them to comply,” he said in a statement on Monday.

The tax office says that while a majority of businesses meet their tax obligations, operations with large amounts of cash present “a major risk indicator” and the ATO will be focusing on ensuring proprietors do the right thing.

“We then work to protect honest businesses from unfair competition by taking action against those who do the wrong thing,” Wheeler said.

“The industries we’re visiting have some of the highest rates of concerns reported to us from across the country.”

The program is part of the tax office’s ongoing project to increase compliance from cash-based businesses through education.

The tax office is concentraing on a number of business sectors that its data analysis suggests might have “an unfair advantage”, including restaurants, cafes, hair and beauty businesses and the businesses in the building and construction industry.

The ATO says it has its eye on industries where it sees frequent instances of businesses reporting “unrealistic income relative to the assets and lifestyle of the business and owner”. It also focuses on those that under-report transactions, and areas in which the community has raised instances of tax evasion directly with the ATO.

Australia’s “black economy” is also in the Federal Government’s crosshairs. When the 2016 Mid Year and Economic Fiscal Outlook (MYEFO) was released last December, the Coalition highlighted numbers from the Australian Bureau of Statistics that suggest the nation’s underground economy could account for as much as $24 billion, or 1.5% of the country’s gross domestic product.

“Black economy activities are both unfair for honest taxpayers and undermine our tax and welfare systems,” Minister for Revenue and Financial Services Kelly O’Dwyer said at the time.

Read more: MYEFO – 11 policies that will effect SMEs

The Turnbull government unveiled a “Black Economy Taskforce” at the end of 2016 to consider a variety of tax enforcement measures from overseas that could also work in Australia. It is be chaired by Michael Andrew AO, who previously chaired the B20 Anti-Corruption taskforce.

The taskforce has been charged with delivering an interim report to government in March 2017, with a final report to be handed down in October, which will “include an overarching whole of government policy framework and detailed proposals for action to counter the black economy”, O’Dwyer said in a statement last year.

While members of the small business community are keen to reduce the scale of the “black” or “underground” economy, regulation could also be made simpler to help businesses avoid unintentionally underpaying on tax, Council of Small Business Australia (COSBOA) chief executive Peter Strong wrote in SmartCompany in December.

“If a business deliberately aims to do “cash only” to scam the system then go get ’em,” Strong said, while also adding that “there are ways to make compliance easier and regulation simpler” for businesses.

Initial consultations on the Black Economy Taskforce’s report were open until mid-February. A series of public meetings discussing the taskforce’s focus will take place in the middle of the year.