It received nearly 60,000 reports of suspected tax evasion, the black economy (people who operate entirely outside the tax and regulatory system) or illegal phoenix activity (deliberately liquidating and re-forming a business to avoid obligations) from July 1, 2018 to May 31, 2019, which is a 42 per cent increase on the volume of referrals in the same time period in the previous financial year.
While not all referrals result in an audit, they help the ATO build a more complete view of risk and help them determine if any further action is required.
More than half of all referrals were for suspected under reporting of income or about the cash economy, for example businesses demanding cash from customers or paying their workers cash in hand.
Assistant Commissioner Peter Holt says the ATO is seeing an upwards trend in the volume of referrals about people suspected of participating in the black economy, which suggests that honest businesses have had enough of competitors cheating the system and getting an unfair advantage.
“Going on current numbers, we’re on track to receive over 70,000 community referrals before the end of this financial year. By way of comparison, we received over 51,000 referrals in 2017–18 and that was the highest ever number of referrals received,” Mr Holt said.
“We understand the pressures business owners face in running a business and that sometimes they make legitimate mistakes. The best way to stay on top of your tax and super is to ensure your records are kept up-to-date.
“Good record keeping will help you complete and lodge your tax returns, manage cash flow, meet your tax obligations and understand how your business is doing.”
The record number of referrals coincides with improvements to the process for letting the ATO know about suspected tax evasion.
The new and improved Tax Integrity Centre provides a single point of contact for reporting suspected or known illegal phoenix, tax evasion and black economy activity.
“Our tip-off line is the taxation equivalent of Crime Stoppers for tax. Members of the community will be able to tip the ATO off online or by calling our hotline on 1800 060 062,” Mr Holt said.
Members of the community can report any known or suspected activity where someone might be gaining a competitive advantage by intentionally doing the wrong thing.
This is not just limited to tax issues. It involves behaviours such as: Demanding or paying for work cash in hand to avoid obligations; not reporting or under-reporting income; illegal phoenixing – deliberately liquidating and re-forming a business to avoid obligations; and over-claiming deductions e.g. paying for home renovations through their business account.
“We value referrals from the community. Tip-offs are assessed and referred to experienced staff for review to determine if any action is required,” Mr Holt said.
“A community tip-off may be the missing piece of the puzzle that we need to finalise an investigation and seek prosecution action to help protect honest taxpayers.”
The top five ‘tip offs’ to the ATO (July 1, 2018 to May 31, 2019):
• Under reported income, 31 per cent;
• Cash economy, 27 per cent;
• Non lodgment, 25 per cent;
• Inadequate or no superannuation paid, 8 per cent; and
• Over-stating expenses, 3 per cent.