About the cash economy

Audits and prosecutions

Our audit activities have a strong focus on reviewing the accuracy and completeness of taxpayer record keeping and identifying unreported income.

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

Reviews and audits

When dealing with businesses identified for review or audit, or those showing early signs of non-compliant behaviour (such as not lodging or late lodgments), we may:

• write to them or phone them to obtain business details that help us to determine the accuracy and completeness of their record keeping
• visit them to discuss a range of issues, including record keeping, superannuation and practical assistance to help them to meet their tax obligations
• ask them to complete a personal living expenses questionnaire
• ask them to demonstrate how their records explain all their business transactions
• check that their records are kept in a manner that enables us to readily ascertain the business's tax liability
• ask them to explain why their business performance varies from the industry averages as indicated by the relevant small business benchmarks
• contact third parties, including customers and suppliers, to gather information about the taxpayer.

If we contact you because the performance of your business is outside the benchmarks, we will always take into account the individual circumstances of the business, based on the records you keep. If there is a good reason for the difference and your business records confirm this, generally we will take no further action.

For more information about what records businesses need to keep and how to maintain them, refer to Record keeping essentials.

Prosecutions

When we detect people engaging in fraudulent and evasive cash economy activities we have the options of either:

• prosecuting them under the Taxation Administration Act 1953 (civil prosecutions)
• referring them to the Commonwealth Director of Public Prosecutions for prosecution under the Criminal Code Act 1995 (criminal prosecutions).

Penalties can include fines and, in the case of criminal prosecutions, imprisonment. These consequences can have a significant impact on the viability of a business.

For more information, refer to About penalties and interest charges (NAT 16826).

Sections within What we are doing about the cash economy

• Data matching
• Small business benchmarks
• Voluntary disclosures
• Audits and prosecutions