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Quarter 4 of 2002

At a recent Tax Office tax seminar, it was stated that:
?The Tax Office is better positioned than ever before to identify people working in the cash economy.  We are working to ensure people who do the right thing are not disadvantaged by people who don't.?
The Tax Office then carried on to point out that:

1. It now has more than 2,700 Tax Office field staff who are involved in audit or verification activities covering Income Tax, GST and PAYG reporting;

2. It was ?focusing? its current audit activities on a range of identified cash industries, namely:
(a) building and construction,
(b) cafes, restaurants and takeaway food,
(c) cleaning services,
(d) clothing and textiles,
(e) clubs and pubs,
(f) hairdressing and beauty salons,
(g) road freight transport, and
(h) taxi services;

3. Its current audit activities had uncovered ?across all industries?:

(a) unrecorded cash payments and receipts,
(b) unrecorded cash-in-hand payments to contractors and employees,
(c) unrecorded trade-ins and capital asset sale proceeds,
(d) incorrect GST claims for capital asset purchases,
(e) incorrect GST claims for input-taxed and GST-free purchases (e.g. interest, stamp duty, and government services), and
(f) incorrect claims for hire-purchase and lease payments.
The Tax Office indicated that the procedures used during these audits included, amongst other things:
1. comparing business results with industry benchmarks and averages;

2. comparing the reasonableness of profits results with purchased goodwill and/or assets invested;
3. comparing cash register tapes against bank deposits;
4. comparing employee head-counts with payroll records; and
5. reconciling Tax Returns with Business Activity Statements (BAS).

It was also noted that since the Tax Office had opened its ?dob in a tax cheat? phone number, it had received a significant number of calls, and these had already influenced the audit selection process.
Be aware that you have a legal obligation to have a Tax File Number (TFN), an Australian Business Number (ABN) and are registered for GST if necessary, and:

1. record all income received and payments made - including cash sales and payments;
2. keep business records appropriate for your business and tax liabilities; and
3. lodge your Business Activity Statements and Tax Returns by their due dates.

Be aware that, if you are in one of the target industries, your Tax Returns and BAS will be reviewed as they are lodged, and, if they do not conform with the expected norms, you will be asked to provide more information.  Then, depending on your answers you may be asked to submit to an audit.
If you would like to discuss any of the above, please give our office a call, or make an appointment to see us.