Beware, the ATO’s crackdown on the cash economy is heating up, as new tactics are being adopted in order to stop small business flying under the tax radar.

The ATO’s latest weapon is a new set of industry specific benchmarks which has been developed with the use of data-matching programs and information from banks. If cash sales of an SME fall outside of these benchmarks, then they can except to come under some heavy scrutiny.

It’s the latest maneuver in the ATO’s war against small business who don’t report all of their cash sales. They’ve come up with a set of benchmarks which detail the expected levels of cash sales that business should be making. When they get reports of businesses falling below that benchmark, then the red lights start flashing and an investigation or audit is on the way.

This strategy joins a whole list of other benchmarks which the ATO has implemented in order to keep a check on the cash economy. It’s anticipated that the ATO will monitor the reports of about 200 000 businesses operating in the cash economy, and they’ll be in contact with about 100 000 of those this year.

The ATO is using the information from banks to go over business activity statements and other banking data. From this they have been able to calculate the average amount of cash sales a business in a particular sector makes. Then they just need to look at the amount of sales made on credit/debit card to give them an idea of how much is sold through cash. If a business is not reporting all of its cash sales, then the ATO will notice they are below average, and will look further into it.

So far there have been benchmarks set for 15 industries:

- restaurants

- cafes

- takeaway food restaurants

- newsagents

- hairdressers

- beauty services

- clothing/retail

- florists

- pubs/bars

- grocery shops and general stores

- fruit and vegetable retailers

- butchers

- fuel retail

- hardware and building supplies

- garden supplies retail

In May this year the ATO was given a healthy $445 Million in order to take its battle against the cash economy and GST compliance to a new level. The Government expects that they’ll benefit from these tactics to the tune of about $3.2 Billion in lost revenue.

Obviously some businesses will have certain factors which see them earning less through cash sales than others, and these will be taken into account. But the ATO reckons that in general, if a business is recording below-average cash sales, then there is a good chance they are under-reporting.

So the moral of the story is, if your small business has been getting away with sliding a few dollars under the table here and there, then it looks like the free run is up. So far the benchmarks have been made for 15 industries, but there’s no doubt that more are to follow soon. Run the risk of not reporting your cash sales, and you run the very real risk of a knock on the door from the tax man.

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