Who uses cash these days?

By Tina Zawila

You would think in this modern day of “plastic” money, that the ATO would be less concerned about the cash economy, after all, who uses actual cash these days?!?  Think again, cash economy audits are alive and well with the ATO.

As a business owner, how do you ensure you can survive an ATO cash economy audit unscathed?

It all comes down to record-keeping and supporting evidence.

When the ATO comes knocking they will request things like Cash Register Tapes (Z Reads) and any other Point-of-Sale reports.  Yes, they will ask for your till tapes, so I hope you are closing off the till every night and retaining the register tapes.  They will also ask you about your “close-of-day” procedures used to reconcile daily sales records to bank statements. How you answer these questions and what supporting documentation you have available will determine how the audit is likely to pan out. 

They will also ask you for your personal records including your personal bank statements and will ask you to complete a living expenses worksheet.  The ATO is matching your lifestyle to the income you are declaring in your business.  Remember they have access to information that you may not have thought of, like Main Roads information on that new car, boat or jetski that you purchased during the year.

The ATO also has access to benchmarks which they will use to compare your business to the rest of your industry.  If your sales are low, or your stock purchases or other expenses are high or outside the “norm”, you can expect questions to be asked.  In fact, if there is a lack of evidence, they are likely to rely on these benchmarks to make an adjustment to your income and assess the tax accordingly. And it’s not just income tax, it’s also GST and the interest and penalties for failure to keep records and making false or misleading statements on both your tax return and your activity statements that will hit you hard.

Your best defence to a future ATO Cash Economy audit is to ensure you are well prepared now.

If you need help with your record-keeping or want to know more about the ATO’s industry benchmarks applicable to your business, call the professional team at Sothertons on 4972 1300.