The ATO has said that it is “really pleased” with the level of tax compliance and engagement from SMEs following recent visits by its officers, while also outlining where the next set of visits will take place.
In March, the Tax Office said that it would go doorknocking as part of its crackdown on the black economy. Businesses that advertise being cash only, pay wages in cash and those operating outside of relevant business benchmarks were among those targeted.
However, the ATO also conceded that many honest businesses struggle with the complexity of meeting their obligations. As such, it decided to combine these audits with proactive educational visits and information seminars to help address these.
The March 2019 visits were centred on Launceston and Smithton in Tasmania, with up to 500 businesses receiving a visit from ATO officers. Assistant commissioner Peter Holt said he was “really pleased” with how they went.
“We were able to help legitimate small businesses to get back on track and commence initial audit activities to those who are deliberately doing the wrong thing,” Mr Holt said.
“Overall, we found a number of businesses just needed help to get back on track.
“One small business owner we assisted was concerned her business records were in a bit of a mess. We sat down with her and provided the tax and super guidance she required. Following our conversation, the small business owner said she felt empowered to get back on track with her tax obligations.”
Mr Holt said ATO officials also discussed some of the aspects of the black economy that attract its attention, “including the most common mistake we see of small businesses failing to keep appropriate records or not declaring all their income”.
“We also spoke to some people about other black economy risks, such as potentially omitted income, overclaimed expenses and risks related to paying cash wages,” he said.
“We’ve provided education material to the owners of these businesses and will continue our conversations with the owners.”
Hour-long information sessions were also held in both towns, conveying common business tax problems and how to avoid them.
Mr Holt said the response to the visits from local businesses had been positive.
“We were also pleased by the positive feedback being spread around the small business community,” he said.
“One small business in Launceston said ‘My friend had a visit from you yesterday, so I was wondering if you would pop in and see me!”
He added: “Many of the business people we spoke to were happy to see that we are out and about ensuring a level playing field for those honest business owners who are doing the right thing.”
Not good news for some
Despite being pleased with the results overall, Mr Holt said several businesses had raised the suspicions of its officers.
This included a restaurant and a store which he said “showed signs of potential black economy activity”, such as undeclared income and “significant cash” flowing through the business that had not been accounted for.
“We want to help Australian businesses get their tax and super right. We understand that people are busy and most businesses are trying to meet their obligations — but there is a difference between needing help, making mistakes and deliberate cover-ups,” Mr Holt said.
“Businesses found as part of the visits to be deliberately not doing the right thing can expect further action from us.”
More visits to come
More of these visits are planned by the ATO across Australia, with officers set to visit as many as 10,000 businesses annually for the next “three to four years”.
My Business can reveal that the next set of visits will be taking place this month, targeting locations across three states and territories.
“We will be visiting the Richmond area (Victoria); the Maroochydore area (Queensland); Batchelor, Bees Creek and Adelaide River areas (Northern Territory); [and] Katherine and Pine Creek areas (Northern Territory) in May 2019,” a spokesperson said.
The Tax Office previously said that these 10,000 visits would target 30 regions across the country, and would be evenly split between metropolitan, regional and remote areas.
“Our mobile strike team visits provide real visibility of the ATO within the community and it positively impacts on small business and community perceptions,” deputy commissioner Deborah Jenkins told the IPA National Congress in November.
“It supports our commitment to protecting honest businesses that are being undermined by their competitors who get an unfair advantage when they don’t report all of their income, and it sends a strong message to those who are deliberately doing the wrong thing that there is a high risk of being detected.”
It comes as ASIC and the Fair Work Ombudsman launched their own visits targeting businesses in Melbourne.
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.
Ask the Experts: Does automation stack up financially?
By Christopher Overton
Opinion: How bad do things have to get?!
By Adam Zuchetti
Business lessons from the All Blacks
By Steve Stanley