ATO spending millions in action against the Cash Economy

Feb. 23, 2011 - PRLog -- The principal of AXXO Accounting & Management, Tony Marchei, is warning all small businesses dealing in cash to be very careful of how they account for it.

The ATO, he says, is spending millions more dollars in trying to catch small businesses who are not declaring all their cash sales.

Mr Marchei said,  " With the extra government funds the ATO has at its disposal and their new change program computer systems they are having great success at catching small businesses who do not declare cash. The important thing to do to make sure your business is not caught in an ATO audit is to keep proper business and accounting records."

Not only is it a requirement to keep proper records but also, if you do, Mr Marchei says, the ATO is more lenient on you because they can see you are trying to do the right thing.

The following quote is taken from the ATO's site:


"The cash economy occurs when businesses use cash transactions to hide income to avoid paying tax.
Participating in the cash economy is a deliberate attempt to under-report or omit income.

Cash economy activities include businesses:

paying wages 'cash-in-hand'
skimming some or all of the cash takings
running a part of their normal business activities 'off-the-books'
not reporting the value of goods and services provided in exchange for other goods and services
operating underground – that is, avoiding their obligations by not registering or lodging returns.

The cash economy is also referred to as the ‘black', ‘hidden' or ‘underground’ economy. The essential characteristic is that transactions go unrecorded and unreported.

The majority of taxpayers do the right thing; however some people deliberately engage in cash economy activity to evade tax obligations and to seek an unfair business advantage.

We are committed to detecting and deterring cash economy activity by taking firm action against those seeking an unfair business advantage. In doing so we are helping to ensure that there is a level playing field and that businesses doing the right thing are not disadvantaged."


Some of the measures taken by the ATO, according to Mr Marchei, are:

Small Business Benchmarks.
For example if you are a plasterer then the total income earned should be within a certain ratio of cost of materials. If your business income is under this ratio then, if you don't have a good reason, the ATO will tax you on more income to bring you within the benchmark ratio.

Cash Sales Benckmarks.
For example the ATO may check a reataurant's EFTPOS deposits aganist that declared on the quarterly BAS Statement. (The banks must give your EFTPOS details to the ATO.)
If your restaurant does not declare a percentage of cash over and above the EFTOS deposits which is within the ATO's cash sales benchmark percentage the, if you don't have a good reason, the ATO will tax you on more income to bring you within the benchmark percentage.

It's all to do with what the ATO expect of you and your business. They expect you to keep proper records to prove how much cash you earn. Without those record keeping systems the ATO will tell you what they expect you to earn and will tax you accordingly.

If you can't do it yourself, or don't want to, you have two choices, according to Mr Marchei.
"You don't run a business or you get a bookkeeping firm such as AXXO Accounting & Management to do it for you. That's what we are here for."

It's not only the tax you have to pay back, it's the penalties and interest you also pay extra.

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Bookkeeping Solutions and Management Systems for small businesses.

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