‘Fed up’: ATO reveals 250,000 tip-offs amid billions in tax evasion
Source: ATO
Businesses cooking the books to escape taxes are being put on notice, with data revealing Australians have reported bosses more than 250,000 times since 2019.
Australian Taxation Office assistant commissioner Tony Goding said on Monday that people were “fed up” with dodgy businesses cheating taxpayers and workers to get a leg up.
He said companies were evading tax by displaying “EFTPOS out of order” and “cash only” signs to shoppers, while also demanding that their workers were paid in cash to avoid any income tax.
Some businesses even used technology that artificially reduced revenue, Goding said.
“These businesses are deliberately undercutting their competitors and gaining an unfair advantage in their industry,” he said.
“People who cheat their competitors and the community will likely try to cheat their customers too.”
What is being reported?
ATO data published this week showed it has received a quarter of a million tip-offs from the community in the past five years, including more than 47,000 in 2023-24 alone.
Astonishingly, about 90 per cent of the tip-offs merited further investigation, leading the ATO to recover millions of dollars in unpaid tax from dodgy small businesses.
University of Melbourne lecturer Lisa Greig said the ATO was looking to crack down on billions of dollars in tax evasion from businesses using cash payments or conspiring to hide income.
Companies illegally using point-of-sale (POS) software to edit their transaction history to hide sales were a particular focus, Greig said, because the ATO viewed it as “systemic”.
“The way these suppression systems work is that if your payment goes through tap and go or even cash, the business can take it out of their POS system,” Greig said.
“It’s systematic and planned, so it’s much more sinister for the ATO.”
Earlier this year the ATO caught businesses evading $23 million in taxes using so-called electronic sales suppression tools (ESSTs) to manipulate their transactions and delete sales.
One example of tax fraud given by the ATO, which it said was “indicative” of a tip-off leading to action, involved a fish and chip shop cheating taxpayers out of $4 million in unreported income.
The business was using a cloud-based ESST to cook the books and reduce their tax bill.
All that extra money helped the owner pay off their mortgage on a seaside house and purchase a boat.
Both of the assets were seized when the ATO found out about it.
What it costs taxpayers
Other forms of tax evasion are less complex, but still responsible for billions in missing taxes with $16 billion in tax evasion stemming from businesses doing things like cash jobs every year.
In one case, a hairdresser who took only cash payments from customers and workers was caught hiding money from taxpayers after a tip-off, which found the business was unregistered.
“Community tip-offs are one of our best sources of information when it comes to tackling the shadow economy,” Goding said.
The building and construction; cafes and restaurants; and hair dressing and beauty services industries were the hottest for tip-offs in 2023-24, according to the ATO’s latest data.
Spotting tax evasion
So, how can Australians spot potential tax evasion?
Greig said warning signs a business was engaged in tax evasion included dealing in cash, rejecting requests to take payments by card, and paying workers in cash too.
But if a business was using electronic sales software to manipulate its books, Greig said customers were unlikely to know about it.
Thankfully, the ATO was getting much better at detecting where businesses were evading tax either through cash payments or ESSTs, Greig said, particularly with advanced benchmarking tools.
“They’ve got heaps of very good benchmarking data,” Greig said.
“If they look at a retail shop or restaurant and see their benchmarks are out compared to someone else, they’ll issue a notice and be able to seize the point of sale technology.
“They’ll find it straight away.”
The ATO said making a tip-off could be anonymous and only took a few minutes on its website.