ATO issues new SME guidelines for cash sales and warns on cash economy crackdown

The Australian Taxation Office has issued a fresh warning to small businesses operating in the cash economy, saying it is likely to look closely at companies whose cash sales fall outside new benchmarks issued for 15 sectors including beauty services, newsagents, pubs and a number of retail categories.

The benchmarks have been developed through the ATO’s data matching program and information provided by the banks about the level of credit and debit card sales small businesses would typically process.

This has allowed the ATO to come up with benchmarks that indicate the level of cash sales a business could expect to have as a proportion of their total sales.

Companies that miss the benchmark can expect to receive a “please explain”.

“Using these benchmarks, the ATO can determine the average proportion of cash sales a business should be making and which businesses are not reporting as much cash income as others in the same industry,” ATO Second Commissioner Bruce Quigley says.

“Businesses whose performance falls significantly outside one or more of these benchmarks are more likely to be selected for a review or audit.”

The ATO expects to contact 100,000 businesses that operate in the cash economy over the course of the 2010-11 year.

“Our new benchmarks allow businesses to see how they compare with other businesses in the same industry – they are usual tools to help businesses assess their performance,” Quigley says.

“And we believe prevention is better than cure, particularly when dealing with the cash economy.”

The ATO’s continued crackdown on the cash economy was bolstered in May by $445 million of new funding from the Government over the next four years for cash economy and GST compliance. The Government expects to regain over $3.2 billion in lost revenue as a result.

The 15 sectors chosen for initial benchmarking are:

• Beauty services
• Hairdressers
• Clothing retailing
• Hardware and building supplies retailing
• Coffee shops
• Meat retailing and butchers
• Florists
• Newsagents
• Fruit and vegetable retailing
• Pubs, taverns and bars
• Fuel retailing
• Restaurants
• Garden supplies retailing
• Takeaway food services
• Grocery retailing and general stores