The ATO has reminded taxpayers that it uses a range of tools to identify and take action against people and businesses that may not be correctly meeting their obligations. Through 'data matching', it can identify businesses that do not have electronic payment facilities.
These businesses often advertise as 'cash only' or mainly deal in cash transactions. When businesses do this, they are more likely to make mistakes or do not keep thorough records.
The ATO’s ability to match and use data is very sophisticated. It collects information from a number of sources (including banks, other government agencies and industry suppliers), and also obtains information about purchases of major items, such as cars and real property, and then compares this information against income and expenditure reported by businesses and individuals to the ATO.
Example: Unrealistic personal income leads to unreported millions
The income reported on their personal income tax returns indicated that a couple operating a property development company didn’t seem to have sufficient income to cover their living expenses.
The ATO found their company had failed to report millions of dollars from the sale of properties over a number of years.
They had to pay the correct amount of tax (of more than $4.5 million) based on their income and all their related companies, and also incurred a variety of penalties.
Example: Failing to report online sales
A Nowra court convicted the owner of a computer sales and repair business on eight charges of understating the business’s GST and income tax liabilities.
The ATO investigated discrepancies between income reported by the business and amounts deposited in the business owner’s bank accounts, and found that the business had failed to report income from online sales.
The business owner was ordered to pay over $36,000 in unreported tax and more than $18,400 in penalties, and also fined $4,000 (and now has a criminal conviction).
Get it in writing and get a receipt
The ATO also notes that requesting a written contract or tax invoice and getting a receipt for payment may protect a consumer's rights and obligations relating to insurance, warranties, consumer rights and government regulations.
Consumers who support the cash economy, by paying cash and not getting a receipt, risk having no evidence to claim a refund if the goods or services purchased are faulty, or prove who was responsible in case of poor work quality.
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Mawer Consulting is a consulting firm located in Perth, Western Australia that provides a range of successful businesses with strategic business advice, accounting and taxation services.
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