Date issued: 31 May 2007

Businesses and individuals need to ensure appropriate cash receipts and payments are included when preparing tax returns at year end, according to CPA Australia.

CPA Australia senior tax counsel, Garry Addison said that taxpayers must look closely at their tax arrangements to ensure they are complying with all relevant obligations.

'The ATO raised more than $81 million from the cash economy in 2005/06, and will continue to crack down on undeclared income.

'Given the ATO’s success in this area, it is again committing significant resources to tackling the cash economy,' Mr Addison said.

For example in 2006/07, the ATO has advised it is contacting more than 55,500 taxpayers by:

• writing to taxpayers who report amounts outside industry norms in their activity statements, asking them to confirm the information is accurate
• making unannounced visits to businesses to check their identification and registration details
• conducting audits of businesses
  

A number of high risk industries have been selected by the ATO for closer scrutiny in 2006/07, including:

• building and construction
• used motor vehicles - wholesale and retail
• restaurants, cafes and takeaways
• horse racing
• licensed hotels and clubs
• fishing

The ATO will also examine trends and cases of potential non-compliance involving:

• businesses which cash business income cheques at cheque cashing shops
• nail salons
• market stall holders

To identify those in the cash economy, the ATO uses a range of strategies.

For example, ABN registrations are cross-checked with income tax lodgments; GST turnover and input tax credits are compared to income and expenses; and financial ratios obtained from activity statements and tax returns are compared across similar types of businesses.

In addition, the ATO will liaise with various other government bodies such as Centrelink on data matching programs to identify undeclared income. 

Other areas that may be reviewed by the ATO this year include:

• business to consumer transactions that do not comply with tax requirements
• high-risk GST refunds
• employer obligations (PAYGW and superannuation)

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