When you choose not to meet your tax and super obligations, you’re taking a risk – and not a small one.
Risky behaviours like failing to declare all your income, taking cash payments without proper records, or overclaiming deductions will significantly increase your chance of audits, financial penalties and enforcement action. Your financial stability could take a big hit, and so could your reputation.
We're paying attention
To ensure a level playing field for all small businesses, we use sophisticated data matching to identify discrepancies and detect non-compliance. We collect information from employers, banks, online selling platforms and other third parties.
By bringing this data together, we can see when reported information doesn’t add up – and take action where needed.
Choices have consequences
What might seem like a short-term gain can quickly become a long-term issue. Deliberately avoiding your tax and super obligations can lead to:
- audits and reviews
- payment of unpaid tax, GST and super
- penalties
- interest on outstanding amounts.
Could this be you?
Case study: Mario's pizza shop
Mario ran a busy pizza shop with steady cash flow and an in-store ATM. Customers were often directed to withdraw cash to pay for their orders, but not all of it was reported.
An audit in 2023 resulted in 50% penalties for reckless behaviour but the problems continued.
The next year, another audit was carried out after receiving a tip-off from the community. It identified $140,000 in unreported income and $80,000 in expenses that were claimed without evidence. This resulted in more than $17,400 in GST shortfall and $49,500 in penalties. With Mario's total debt exceeding $66,000, he entered into a payment plan to manage it. The ATO also moved his business from quarterly to monthly BAS reporting.
End of example
Case study: Ethan's tax return
Ethan believed his tax return was complete, but a $50,000 job reported through the Taxable Payment Reporting System (TPRS) was missed.
It didn’t go unnoticed by the ATO. This led to a tax shortfall of $15,500, plus $3,800 in penalties and $700 interest. Ethan was required to complete record-keeping training and review how he tracks and reports his income.
End of example
Case study: Mike the sole trader
Mike was a sole trader doing small contracting jobs, often juggling multiple clients and relying on handwritten notes to track his income. When things got busy, not everything made it into his records. It didn’t seem like a big gap, but it was enough.
The missing income was picked up by the ATO, resulting in a tax shortfall of $5,400, plus $1,300 in penalties and $300 interest.
End of example
Case study: Sarah's hair salon
Sarah opened a busy hair salon and asked her clients to pay with cash. Not all of it was recorded in her BAS and tax returns. At the time it didn’t feel urgent, but it added up.
When reviewed by the ATO, this resulted in more than $92,382 in GST shortfalls, a $225,770 income tax shortfall and $159,075 in penalties. With such a large liability, Sarah was unable to keep up with her repayments and was forced to restructure her business. Ultimately, Sarah had to wind up her business.
End of exampleIt's not just about you
Participating in the shadow economy and operating outside the system affects everyone. When these actions are repeated across the community, they:
- create unfair competition
- undermine legitimate businesses
- reduce funding for essential community services
- expose workers to exploitation and injury
- increase the risk of corruption and illegal activity.
Make the right choice
Meeting your obligations protects your business, supports fair competition, and helps ensure community services are properly funded.
Everyday choices matter. Choosing to do the right thing keeps the system fair for yourself, and for our community.
Find out about what you can do to help protect Australia from the shadow economy.
We have resources to support your small business and information about what's attracting our attention as part of the small business focus areas.
Authorised by the Australian Government, Canberra.