By Tina Zawila
Maybe it was just a coincidence that this Halloween, the ATO visited Gladstone? For many the thought of the ATO showing up on your doorstep may be a little frightening, however, the purpose of their visit was to provide an update on their activities and to gain feedback on how our region was coping with the significant changes in our economy.
In particular, the Chair of the Tax Practitioners Board advised that the ATO will be focusing on several areas this year, but in particular he noted work related expenses claimed by salary and wage earners and the black economy.
Now you may think that the black economy has nothing to do with you, as we typically associate the black economy with the big end of town – the giant corporations who don’t pay their fair share of tax. However, the facts are, that the black economy represents 3% of our economy at A$50billion, of which corporate tax losses from multinationals is only A$3billion. You may also think of drugs, illicit tobacco, counterfeit goods, unregulated offshore gambling etc, however, it is actually understated business income that represents a significant portion of the black economy (A$10-$20billion).
We are all aware of the cash economy and unconsciously many of us participate – how many of you ask a tradie or a retailer “how much if I pay cash?”, expecting a lower price? The problem with this common practice is that it promotes an unfair playing field where the businesses who do the right thing are at a commercial disadvantage.
The Black Economy Taskforce gathered evidence from many sources including contractors who are outbid on contracts in various industries because they don’t make cash payments to their workers and contractors. Many of them are completely frustrated that their ability to earn their income was being undermined by people who were just aggressively under-pricing and cheating.
The Taskforce final report argued for a “near non-cash world”, however the government didn’t quite embrace that concept. They did accept many of the report’s recommendations including things like an economy-wide cash payment limit of $10,000, a ban on electronic sales suppression tools, making businesses report payments to contactors in high-risk industries, and extending ATO audit and compliance programs.
So we can expect to see an increase in ATO audit activity regarding cash transactions, contractor payments and “sham” ABN’s used by people who are engaged as contractors when they should be employees.
If you need further advice or assistance with tax compliance or reporting obligations contact the professional team at UHY Haines Norton on 49721300.