The majority of taxpayers do the right thing. However, some business owners deliberately avoid paying their fair share of tax. In doing so, they gain an unfair advantage over honest businesses.
Businesses that deliberately hide income to avoid paying tax are part of the 'cash economy'. Hiding income includes:
- paying cash wages to staff without keeping records
- not declaring some or all cash sales
- not recording online sales
- over claiming expense deductions.
The term 'cash economy' covers money hidden by not declaring all sales cash sales, EFTPOS, credit or debit card sales, and online sales.
To protect honest businesses, we analyse data from all relevant taxpayers to identify anomalies that may indicate someone is not doing the right thing. We then undertake further checks, including:
- checking whether income from the business can support the lifestyle of the owners
- comparing an individual business with others in the same industry using the small business benchmarks
- matching data from sources such as Australian and overseas banks, suppliers, online selling and Centrelink
- using information from customers and the public.
If a business is not paying its fair share of tax, we take action to collect the tax and remove the unfair competition for other businesses. In many instances the business also needs to pay penalties, and sometimes business owners can go to jail.
Case study: Data matching uncovers hidden income
We selected Melbourne restaurant owner, Claudia, for an audit because of discrepancies between her reported income and data we received from the bank.
Before starting the audit, we asked Claudia if she had made any mistakes. Claudia spoke to her bank and tax agent and worked out she had not reported her entire turnover.
Because she told us about her mistake and used a Voluntary disclosure form to correct her business tax returns for the 2011, 2012 and 2013 financial years, she had to pay the tax she missed, but because of the voluntary disclosure we reduced some of her penalties.
You can help stop the cash economy. Your everyday choices and actions make a difference.
If you are a customer, insisting on a receipt or tax invoice contributes to an environment where all businesses pay their fair share of tax.
Proof of purchases helps ensure a supplier honours a warranty or guarantee.
If you are a business, you must report all your income and true expenses to us. This includes cash and all EFTPOS, card and online sales.
If you haven't reported all your income, or made a mistake, contact us to correct the information.
You can use our small business benchmarks to see how your business compares to others in your industry. If your figures are very different to your competitors, you may have made a mistake.
We use the benchmarks and other indicators to identify businesses that may be avoiding their tax obligations by not reporting some or all of their income. If we notice that your figures are very different to others in your industry, we may contact you to understand the difference.
If you suspect a person or business isn't reporting income, tell us about it so we can help protect honest businesses.
We review all reports and treat your information confidentially – you don't have to give your name if you don't want to.
If you do not speak English well and want to talk to a tax officer, phone the Translating and Interpreting Service (TIS) on 13 14 50 for help with your call.
If you are deaf, or have a hearing or speech impairment, contact us through the National Relay Service (NRS). For more information, visit relayservice.gov.auExternal LinkHow we are helping Australian businesses compete fairly. Businesses need to declare all their income and claim the expense deductions they are entitled to. If you see someone doing the wrong thing, tell us.