Institute of Certified Bookkeepers

Why the ATO is Targeting ‘Cash Only’ Businesses

The ATO are visiting businesses across Australia as part of their ongoing focus on the cash and hidden economy. In particular, the ATO are focusing on businesses advertising ‘cash only’ or dealing mainly in cash.

The ATO will work with business and industry associations, along with local authorities like chambers of commerce and councils, to improve the use of non-cash methods, and to identify potential businesses that would benefit from such assistance. While not all cash-based businesses are engaging in unlawful behaviour, the use of cash-only approaches can present problems.

There are a number of reasons why the ATO is targeting cashless businesses:

  • Consumers are going cashless and expect to have a choice.
  • Fewer mistakes – so less contact from us.
  • Quicker reconciling at the end of the day – less time in queue at the bank.
  • Less chance of being presented counterfeit notes.
  • Reducing the risk of theft or break-ins.

Additionally, the ATO wants to ensure that services meet community expectations, and that vendors are not underreporting profit and overstating expenses to avoid taxation obligations.

Recent reviews and audits resulted in some very interesting findings, and some very substantial penalties in a number of industries.

Construction

The ATO identified a company in the building and construction industry that hadn't reported over $970,000 in cash sales over a two year period. The omitted income had been transferred into nine personal bank accounts as employee payments, including the company director. The nine employees also didn't report this income in their personal income tax returns. This resulted in over $90,000 GST payable by the company with failure to withhold penalties of over $200,000 on the wages provided to its employees. The total shortfall of income tax payable by the individuals was $277,000 with penalties of over $175,000.

Restaurant and Café industry

When visiting one business, the ATO team noticed the Australian business number (ABN) quoted on cash register sales receipts varied. When the team asked about this, the owner made voluntary disclosures about over-claimed expenses.

During the audit, the ATO also found further unreported income and more over-claimed expenses. This led to adjustments of more than $1.1 million. Penalties imposed on the tax shortfall were reduced by just over $12,000 because of the disclosures. GST, income tax and penalties payable exceeded $211,000.

It is clear that the ATO is committed to catching the unscrupulous vendors that are underreporting their income and gaining unfair advantage.

Impact for Bookkeepers and your Businesses

The discussion needs to happen.

Use this information article to raise the business owner's awareness and consider their operations, where applicable.

  • Updated: 25th June, 2018
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