The Cash Economy

The Cash Economy

The ATO are making it harder for people to get away with not reporting cash income.

Cash economy activities include businesses:

  • paying wages ‘cash-in-hand’
  • skimming some or all of the cash takings
  • running a part of their normal business activities ‘off-the-books’
  • not reporting the value of goods and services provided in exchange for other goods and services
  • operating underground – that is, avoiding their tax and superannuation obligations by not registering their business or lodging returns.

So, how do the ATO detect the cash economy?

Data matching

They collect significant amounts of information from a number of external sources that we then compare to reported income and expenditure; both business and personal, to identify taxpayers who may be failing to report all their income. e.g.

  • credit and debit card matching
  • online selling data matching

They also look at businesses that report net income that appears to be lower than required to support the business operators personal living expenses.

Small business benchmarks

They have published more than 100 small business benchmarks.

The benchmarks provide an opportunity for businesses to compare their performance against other similar businesses in their industry.

They use the benchmarks to identify businesses for audit that may be avoiding their tax obligations by not reporting some or all of their income.

Voluntary disclosures

Voluntarily disclosing mistakes in your tax affairs that increase your tax or decrease your credits will, in most cases, open the way to concessional treatment for both penalties and interest charges.

Audits and prosecutions

They apply the full force of the law if people deliberately seek to abuse the tax and superannuation systems by engaging in the cash economy.

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