Record number of businesses reporting tax evasion cases to ATO

The Australian Taxation Office (ATO) recently announced that it has received nearly double the amount of referrals from the community about tax evasion compared to the same time last financial year. The ATO received nearly 60,000 reports of suspected tax evasion, the black economy or illegal phoenix activity from 1 July 2018 to 31 May 2019, which is a 42 per cent increase on the volume of referrals in the same time period in the previous financial year.

While not all referrals result in an audit, they help build a more complete view of risk and help us determine if any further action is required.

More than half of all referrals received from 1 July 2018 to 31 May 2019 were for suspected under reporting of income or about the cash economy, for example businesses demanding cash from customers or paying their workers cash in hand.

The top 5 “tip offs” to the ATO (1 July 2018 – 31 May 2019)

  1. under-reported income 31 per cent
  2. cash economy 27 per cent
  3. non lodgment 25 per cent
  4. inadequate or no superannuation paid eight per cent
  5. over stating expenses three per cent.

Assistant Commissioner Peter Holt said, “We’re seeing an upwards trend in the volume of referrals about people suspected of participating in the black economy, which suggests that honest businesses have had enough of competitors cheating the system and getting an unfair advantage.

“We’re on track to receive over 70,000 community referrals before the end of this financial year. By way of comparison, we received over 51,000 referrals in 2017-18 and that was the highest ever number of referrals received.

“We are committed to supporting business meet their tax and super obligations, and offer a range of resources for businesses to get it right,” Holt added. “Good record keeping will help you complete and lodge your tax returns, manage cashflow, meet your tax obligations and understand how your business is doing.”

The record number of referrals coincides with improvements to the process for letting the ATO know about suspected tax evasion. The new and improved Tax Integrity Centre will be launching on 1 July, and will provide a single point of contact for reporting suspected or known illegal phoenix, tax evasion, and black economy activity.

“Our tip-off line is the taxation equivalent of Crime Stoppers for tax. Members of the community will be able to tip the ATO off online or by calling our hotline on 1800 060 062,” Holt said.

Members of the community can report any known or suspected activity where someone might be gaining a competitive advantage by intentionally doing the wrong thing. This is not just limited to tax issues. It involves behaviours such as:

  • demanding or paying for work cash in hand to avoid obligations
  • not reporting or under-reporting income
  • illegal phoenixing – deliberately liquidating and re-forming a business to avoid obligations
  • over-claiming deductions e.g. paying for home renovations through their business account.

All tip-offs are private and can be anonymous. The ATO does request contact details in case information provided needs further clarification.

“The Black Economy Taskforce estimates that the black economy is costing the community as much as $50 billion each year, which is approximately three per cent of Gross Domestic Product (GDP),” Holt said. “Businesses that operate in the black economy are undercutting competitors and gaining a competitive advantage by not competing on an even footing. Improvements to evasion reporting and analysis of intelligence received are just two of the many ways we’re tackling the black economy.”

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