ATO campaign to reveal poor business practices
As part of its ongoing focus on the cash and hidden economy, the ATO created a campaign focusing on businesses that are dealing mainly with cash and or advertising “cash-only”.
ATO named the campaign Protecting Honest Business, which refers to the unjust advantage these cash operators have over those who declare their income and do the right thing. ATO aims to protect honest businesses from this unfair competition.
The ATO has also been focusing on businesses that:
- data matching suggests they don’t take electronic payments
- are part of an industry where cash payments are common
- indicate unrealistic income relative to the assets and lifestyle of the business and its owner
- fail to register for GST or lodge activity statements or tax returns
- under-report transactions and income according to third-party data
- fail to meet superannuation or employer obligations
- operate outside the normal small business benchmarks for their industry
- are reported to the ATO by the community for potential tax evasion (it says the number of reports it receives shows that the community is less tolerant of unfair practices in these industries)
ATO’s visits around the country found businesses that:
- don’t have separate business and personal bank accounts
- don’t record all sales or keep proper books
- had friends, family and other employees working “off the books”
Poor record keeping greatly affect business stability
The ATO says that there are a number of things that cause small businesses to fold, and high on that list is poor record keeping.
That’s why more than half of the businesses the ATO visited in its Protecting Honest Business campaign were found to be in need of an improvement in their record keeping.
Common issues the ATO found included businesses:
- Estimating their sales and income
- Using the “no sale” and “void” button on cash registers when taking cash payments
- Not keeping cash register tapes and not reconciling at the end of the day
- Paying their employees cash-in-hand.
The ATO says they will recommend to these businesses that they attend one of its record-keeping workshops. The workshops cover the advantages of good record keeping and how it will save them time.