Gathering data from the 43,000 tip-offs received during the 2021-22 financial year, the Australian Taxation Office (ATO) has revealed the industries that have found to be lacking in their tax compliances and obligations.
The revelation is part of the ATO’s strategy in dealing with the ‘shadow economy’, which refers to financial activities that take place outside of the tax and other regulatory systems. The ATO estimates that the community misses out on around $11 billion in taxes each year because of the shadow economy.
Topping the list of industries the ATO was tipped off about in the past year were building and construction, hairdressing and beauty services, cafés and restaurants, road freight transport, and management advice and related consulting services.
“The last couple of years have been tough for some businesses,” ATO Assistant Commissioner Peter Holt said. “But this doesn’t make it okay to gain an unfair advantage over honest businesses playing by the rules. The shadow economy is an economic and social issue that affects all of us.
“As businesses recover from the impacts of COVID and natural disasters it is more important than ever to protect the vast majority of businesses who are honest and try to do the right thing,” Holt added. “Every dollar of tax dodged is a dollar that can’t be used for vital services like health and aged care.”
The ATO has also shared some red flags whether a business may be operating in the shadow economy, such as ‘cash only’ signs, offering a discount for cash, not accepting card payments, failing to provide payslips to workers, not ringing up sales, or even running illegal software that deletes or modifies sales transactions.
Holt also encouraged tax professionals to look out for shadow economy behaviour.
“We’re asking tax professionals to dig deeper and ask their clients more questions when things don’t add up,” Holt said. “When reported income falls outside of our small business benchmarks, this should be a warning sign to tax professionals that they need to ask more questions as there could be some shadow economy behaviour at play.”
Holt added that while it’s true that digital payments have increased in popularity through COVID-19, this doesn’t mean that the shadow economy has stalled, saying that while this may be true for some businesses, there is still a lot of cash in circulation that is being used in the shadow economy.
“Just because digital payments have increased in popularity, this doesn’t mean that the shadow or cash economy has disappeared, it’s still there, and we’re determined to shine a light on it,” Holt said.
“The ATO will take firm action against business owners who deliberately avoid paying their fair share of tax. We know that honest businesses and the community expects us to do this. It’s all about keeping the playing field as level as possible.”
