Keeping your Small Business off the ATO’s radar

The ATO has recently published a media release claiming the national tax shortfall, also called the ‘tax gap’, is in part due to small business tax compliance issues. Figures released indicate a 12.5 percent tax gap is due to the SME sector. The tax gap is a measure providing estimated tax collected by the ATO should all participants comply in full with Australian Tax law.

To combat this statistic, the ATO have recently stepped up its ‘visits’ to small businesses in an effort to provide industry specific information and to monitor compliance behaviour. Current plans are to visit up to 10,000 small businesses during the 2019/20 financial year. Recent commentary by ATO Deputy Commissioner Deborah Jenkins suggests the ATO understand some tax issues may be genuine errors and unintentional misstatements regarding income recognition and allowable expense deductions, but that the ATO is determined to reduce the sizable taxation revenue deficit in Australia. This will foremost be through targeting the ‘black economy’. Other areas on its hitlist are ensuring business compliance with appropriate revenue and expense record keeping and suitable payroll and superannuation entitlement processing methods. .

Key factors of non-compliance as noted by the ATO include –

• Incorrect treatment of private use of business assets or non-disclosure of private expenditure.
• Failure to declare all sources of income.
• Failure to maintain an appropriate record keeping system.
• Paying staff ‘off the books’ for work activities.
• Incorrectly classifying employees as contractors and subcontractors.
• Incorrect payment and/or recognition of staff wages and entitlements.
• Lack of understanding of tax obligations.

There is however no need to panic. A well organised business is, more often than not, a tax compliant business. Here are several points to assist you to assess whether your business is tax compliant:

• Ensure your employee payment details, superannuation entitlements and other benefits are recorded correctly and all payments to employees and the tax office are up to date.
• Make sure your tax assessments (FBT, periodic BAS and quarterly or monthly PAYG Withholding lodgements) are up to date.
• Provide the ATO with any critical information which may affect your ability to meet your business tax obligations.
• Ensure you are using a concise, efficient and well logged accounting system and ensure all receipts and invoices are readily available for substantiation, if required.

If you require support with setting up efficient processes or further information regarding your tax obligations, please call our office for a friendly discussion. At Venture Private Advisory we provide an effective accounting service, giving you the tools to ensure your small businesses is tax compliant and continues to be successful.

By Jonathan Roberts. Accountant – Venture Private Advisory.

You can also read this Christmas and the Taxman here.