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Another day, another taskforce set up by the Australian Taxation Office (ATO). With an estimated $11.1 billion tax revenue missed by the ATO due to black economy behaviours, it is no wonder that the ATO is rounding up its troops and devising a plan of attack.

So what is the black economy?

Basically the black economy refers to those businesses that do not report their tax obligations correctly to the ATO. This may involve businesses not reporting all of its income, as well as undertaking fraudulent activities such as fabricating deductions, paying undeclared cash wages, and/or dealing with other off-the-books business transactions.

These behaviours can result in the underpayment of income tax, GST, PAYG withholding, and so forth.

Winter may be over, but the ATO is coming

With an alarmingly high tax gap believed to be from small businesses, the ATO is doing all it can to try and recoup this tax revenue. Although the ATO is still in the early stages of implementing measures to mitigate this gap, we have already seen some strategies in play.

One such strategy is the $10,000 cash payment limit. This is where businesses are not allowed to undertake cash transactions that are above $10,000. By limiting cash transactions, the ATO is hopeful that it can potentially reduce black economy activities.

As we now live in a digital world, where everything is up in the cloud, data matching seems to be the ATO’s best friend. However, you may soon find the ATO adopting a “friendlier” approach next time you answer your door with their field staff visiting businesses face-to-face.

Rest assured with your trusted advisor

At times, even honest taxpayers can find themselves caught in the web of the black economy. Factors such as human errors, poor record keeping systems, and lack of understanding of a complex tax system, can often contribute to incorrect and/or incomplete information being reported to the ATO. This is the time when it is important to have a good accountant by your side who can provide your business with assurances by checking that your systems and processes are adequate, as well as identifying and reviewing your assessable and deductible transactions, and making sure all lodgement obligations are met.

Further questions?

If you have questions or would like assistance with your business and tax planning, please contact Angela Stavropoulos or Kristy Baxter on (07) 3023 1300 or [email protected].