The ATO Small Business Tax Gap report released today highlights a $11.1billion tax gap, almost two-thirds (64%) of this credited to black economybehaviour such as not declaring income, workers paid cash ‘under the table’ orexaggerating expenses.

71% of small businesses reported their tax correctly and a further 18%attempted to report correctly but made mistakes, mainly due to poor recordkeeping or human error.

For the more than four million small businesses in Australia, it is essentialto have proper records in place for tax time, so they can substantiate andjustify all claims.

Australian Tax Leader at Chartered Accountants Australia and New ZealandMichael Croker said the report is a warning to the millions of smallbusinesses now completing their 2019 income tax returns to ensuredocumentation is complete and accurate.

“We are pleased to see that the ATO has found Australian small businesses usetax professionals more than those in countries that have reported a larger taxgap,” said Croker.

“It is important to ensure that all income is recorded and that privatecomponents of an expense are not inadvertently claimed as a business expense.

“It is also essential for businesses to disclose all financial transactions toyour Chartered Accountant to ensure you are compliant.

“Businesses that do not accurately share their claims need to consider thatthe ATO has considerable powers to investigate, claim money back andpenalise.”

The impact of the few businesses that are participating in the black economyis enormous.

“This is not “their” money, it’s Australia’s money, and each incorrect claimadds up to billions being diverted from Australian services andinfrastructure,” said Croker.

“The black economy places undue and unfair competitive pressure on themajority of small business operators who are doing the right thing.

“The Black Economy Taskforce made a number of recommendations to reduce theimpact of the black economy and this report certainly gives the argumentcredence.

“The anonymity of cash ensures those participating in black economy remainunder the radar.

“An extremely conservative RBA estimate shows that $1 billion is warehoused bythe black economy with a further $5 billion used for operational purposeswhich represents up to 8% of bank notes in circulation.

“Implementing a ban on cash transactions of $10,000 or more will make it moredifficult to operate in the black economy with very limited impact on thosewho prefer cash and operate within the regulatory systems.”

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