What is the ATO doing to cash up with the tax position on the cash economy?
For a very long period, there has been an issue in Australia with non-compliance with the Taxation legislation and rules in relation to the cash economy. An entire legion of small businesses had established a pattern of non-compliance in some regions in Australia and the existence of the cash economy was a major problem for the integrity of the tax system. Since 1996 there has been a progressive crackdown from the ATO on the cash economy which was first announced by Tax Commissioner Michael Carmody as a result of a Task Force Report. The report found that the implementation of the new tax system had resulted in maore than $135m in receipts being withheld from businesses not quoting an ABN number. Thousands of businesses which previously were outside the tax system and not quoting an ABN came into the system and this resulted in more than $50m in back taxes being raised. Also, the institute of Chartered Accountants reported that there was a reamrkable improvement in invoicing proceedures between businesses as a result of the implemantation of the new tax system which was in part designed to eliminate much of the unrealised revenue circulating in the Australian Economy as a result of the cash economy.
How do I decide to account on a cash or accrual based tax accounting system?
If you have a business which handles a lot of cash, you need to make a decision about you cash or non-cash accounting. This is because there are elements of the GST system which make it necessary to choose to use non-cash accounting in certain circumstances because the system has controls in place. The criteria for cash accounting are that if you are a small business or an enterprise with an annual turnover of less than $2 million, or there are some also some other exceptions to accrual accounting which allow you to account on a cash basis particularly for not-for profit organisations or other enterprises of this type. If you need advice about this aspect of the taxation law, we have taxation lawyers available online now to chat with you about taxation law issues or you can post you taxation law related question to the contact form or question box below.