The ATO is always keen to ensure that the tax system is fair and that all Australian taxpayers are paying the right amount of tax on their income.
SME / Investor Targeting
The ATO, to many people’s surprise, read the paper. They are aware of property transactions if they are in the news. For example, we have heard of instances where a property owner receives a friendly letter from the ATO reminding them to report the capital gains or income tax position on the sale of a property – before it has even settled.
Tax cases too can drive ATO targeting. Following a recent case around medical practices, for example, the ATO is looking at sale of businesses by professionals such as doctors and dentists to large corporates to ensure the right tax position is declared.
Two particular areas that provide the ATO with some concern and which they will pay particular attention to in the current year and beyond are the “cash economy (black economy)” and the new “sharing economy”.
Cash economy (black economy)
The ATO have always had the cash economy on their hit list and this year is no different.
A special “black economy taskforce” has been setup purely focused on this area as the ATO believes the cash economy provides unfair competition to those taxpayers who are law abiding. Other reasons for doing this include to capture lost tax revenue and catch those receiving illegitimate welfare payments that cost the country in excess of $15 billion per year.
Receiving cash into the business and paying it directly out to staff as cash wages may seem like a “victimless crime” for the business as they would have had the income offset by the deduction for the expense anyway. However, it is the roll-on effect where the issue lies. Firstly, the business is not returning the GST to the ATO on the income, and second the employee is probably not getting superannuation or workcover. For the employee this would mean reported income is lower than it should be allowing them to be eligible for government benefits they may not have otherwise been eligible for.
So which industries will the taskforce focus on?
These will mainly be businesses in the following industries:
- Beauty salons
These businesses tend to have high cash turnover and have always been on the radar.
How do the ATO choose who is up for review?
This is a simple process of benchmarking similar sized businesses in similar industries. The ATO compares taxpayer’s income tax returns to other players in their industry and if you are outside the norm you are flagged in the system for further investigation.
Service ‘Sharing’ economy
The other area of interest for the ATO is much shinier and new. Airbnb, Air tasker and Uber just to name a few, are part of the sharing economy. These refer to buyers and sellers connected via an App or Website to provide such services as:
- ride-sharing – transporting passengers for a fare
- renting out a room or house for accommodation
- completing odd jobs, errands, deliveries etc.
So are you part of the new 'sharing economy'? If so the ATO is definitely getting shared information on you.
The ATO actively seeks information from these organisations as to who is on their list of ride-share drivers, accommodation hosts or are contracting to perform tasks on their platforms and the ATO uses this list to review taxpayers to ensure they are returning any income earned. In March 2017, Uber alone reported they had over 60,000 registered active drivers.
This being the case, all income and expenses in relation to these ventures should be included in your tax returns and you will also want to make sure they are legitimate. Benchmarking and data matching will be used by the ATO to ensure taxpayers are doing the right thing.
If you have been receiving cash payments or making some money on the side, renting out a room in your house or using your car to transport people from place to place, have you remembered to tell the ATO about it? Whether you like it or not, the Commissioner probably already knows.
Want to know more about the ATO and the new "sharing economy"?
Learn more about SMEs