09 September 2016
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Australians are becoming more and more suspicious of any business with a “Cash Only” sign or who will only operate on a cash only basis. Not only is it very inconvenient as eftpos and debit cards become more frequent, Australians are using cash less often. In fact, Alana Mitchelson (@AlanaMitchelson) who is a Consumer Affairs journalist stated in her July article “Businesses are operating as cash-only to avoid paying tax” quoted:
If you’ve ever been confronted with a ‘cash-only’ sign and felt suspicious as to why the business doesn’t accept card payments, you’re not alone.
The SBS also reported that the ATO visited a number of businesses in Sydney’s China Town to discover over 18 million dollars in misreported transactions.
The Australian published that the ATO were looking in suburbs were there were a high statistical rate of cash only businesses in Sunnybank (Brisbane), Gold Coast (QLD), Cabramatta and Chinatown (Sydney), Glen Waverley (Melbourne) Glenelg (Adelaide) and Perth’s CBD.
I also personally feel that Mount Gravatt should also be included in the Australian Taxation Office’s net along with overcrowded Room style and Airbnb type accommodation in Sunnybank, Robertson, Coopers Plains, Calamvale, Eight Mile Plains, St Lucia and Southbank areas. In fact any suburb that has a University nearby should be targeted by the Australian Taxation Office for cash based rental properties.
The black economy situation with real estate in my opinion does exist, the 2016 consensus states that 11% or 1 million homes are sitting empty. The Australian Taxation Office believes that some investors are lying about the emptiness of these unoccupied residences. The amount of expenses appear to overshot the amount of income derived from around 100,000 rental properties. There was 40 million dollars declared, with 44 million dollars of expenses claimed, this makes the Australian Taxation Office suspicious.
From soldiers, tradies and the building industry in general were placed on notice in 2015 that the Australian Taxation Office was targeting them for the cash economy.
I personally can assure you that this was the case, as my husband was audited by the tax office in 2015 a month after his dad had died for a “Cash Economy Audit”.
We were requested to gather all of our 2012-2013 personal bank statements and credit cards for the entire year and fill out six pages of documentation to balance back to our tax returns lodged. Included was a request for a tax quarter where we purchased a company car to ensure that we had the bank statements, credit card and receipts for his electrical business compiled to be examined as a preliminary process.
I have never had to reconcile my personal expendature, so it was with some preparation and extensive time I gathered all the many personal bank accounts and credit cards for the ATO audit. Fortunately, my husband and I are completely transparent and we mainly use debit and credit cards. This certainly made our substantiating our personal spending to income lodged relatively straight forward.
However with the Australian Taxation Office very confident that there are billions of dollars to be found in thee building industry, contractors cannot expect to dodge a tax audit indefinitely.
The new budget also has moved to ban the use of any cash over $10,000 and force them to use digital means.
There are two entities that the Government are aware of:
1. The illegal and shady behavior of criminal activities with drugs, tobacco and prostitution
2. Legitimate businesses not declaring the correct amount of tax or declaring all income.
You can hear the arguments for why the crackdown on using cash has been passed for the Black Economy Taskforce.
Some state that the “big brother” approach is the start of a war on privacy and currency. It is a push by the government to have a digital system so that it will make it very easy to see where people are spending their income. There is a fear that the use of big data might be a very dangerous tool that might be used against the consumer in unanticipated ways.
Business owners and sole traders who are cash only to avoid declaring their correct income are simply not allowing us to pay on the same level. They are unfairly placing themselves in front of a honest business who declares all their income. To be blunt, they are stealing from the tax system and if you know anyone involved in the cash economy, they should be reported.
If you find that someone is not operating their business as they should, you are encouraged to say to these dishonest operators.
How do you know if their business practices are suspicious?
Then you should report their activities to the Australian Taxation Office.
How do you report them?
Here is the link to Report a concern about tax evasion
What if I just made a mistake?
Fess up about your tax dodging ways
Amanda Hoffmann is a registered BAS Agent No.18613005, Associate of Finance, Xero & Myob Certified Consultant, a Queensland’s Quickbooks Trainer and works with the ATO on their advisory boards.
She says she is more than just a bookkeeper with experience in real estate investing, social media, podcasting, public speaking and blogging.
Amanda would love to train you to use accounting software, if you need help fixing a messy account or general assistance with automating your administrative duties to save time and money.
