The Cash Economy And Your Business
It used to be that you submitted your tax return and associated paperwork and that was all there was to it. The taxman took your word and you either paid your tax or received your cheque. Nowadays the taxman is using systems to identify businesses that are not reporting income as well as operating businesses which have not registered with the Australian Tax Office (ATO).
How? Tax authorities are getting smarter and tracking credit card transactions of almost 1 million businesses. The ATO now has the ability to collect data from the major banks and credit card providers and electronically match it with their records.
This Credit and Debit Card Data Matching Program is actually now in its 5th year of operation and allows the ATO to track down businesses operating in the illegal cash economy. In the 2013-2014 tax year, they plan to match more than 640 million transactions from sources such as banks, share registries, employers, merchants, states and territories and government departments. They then intend to follow up with 245,000 reviews and audits to try to catch those unaware.
Their intention is to create a level playing field for businesses as well as detecting non-compliance. Their aim is to encourage taxpayers to do the right thing and deter those who don’t.
For those who submit accurate tax returns for their businesses, of course there should be no cause for concern. It is the businesses who spend and receive thousands of dollars in credit card transactions and fail to report which will be their focus.
While the system is still relatively new, it does have some issues. Last year it was revealed that almost 6,000 small business taxpayers were wrongly accused by the ATO of dodging tax payments. That doesn’t bode well for the tax office and sounds like a lot of money wasted from their perspective. However they have assured us that they are working to address issues particularly in improving small business benchmarks.
What are your thoughts on the ATO processes?