The Australian Taxation Office (ATO) has had a crack-down on cash payments in the construction industry in the past few years. One of the ways that the ATO has done this is to create a new form, called the Taxable Payments Annual Report (TPAR), which almost all businesses in the construction industry must complete and submit to the ATO. Enrico De Pietro, one of the Directors of Optima Partners discussed this report in a BLOG published in July 2015
But what do you risk if you operate in the cash economy and fail to comply with the rules?
Chances are that payments you are receiving are going to be reported to the ATO when the business paying you completes their TPAR and provides it to the ATO. That will make it harder for you to declare income lower than what you have actually received. The business paying you must declare it on the TPAR they submit if they want to claim it as a deduction. If figures provided by a business on it’s TPAR and it’s tax return don’t correspond it might raise a red flag.
If you are paying contractors and suppliers in cash and have no substantiation of your expenses they won’t be allowable deductions and you will end up having to pay more income tax. That’s income tax that would have been paid by those contractors and suppliers.
Apart from the ATO making it harder to operate in cash in the construction industry, it is continuously getting more and more difficult to get away with doing the wrong thing. Government agencies are getting better and better at sharing information, such as transactions in real estate, vehicle purchases and share trading transactions, to name just a few.
Penalties can be applied to any shortfall amount. If you give false or misleading information the ATO can hit you with a penalty of 25% if you are deemed to have failed to have taken reasonable care, 50% if deemed to be reckless or 75% if you have intentionally disregarded the law. Interest is then charged on top of that. The price of cash – it could be crippling!
Personally, I think that the crackdown by the ATO is a good thing for two reasons. Firstly, I am a taxpayer who does the right thing and pays his fair share of tax. Secondly, at Optima Partners we have many clients who always do the right thing and pay their fair share of tax.
I know that the extra compliance is a pain and an extra cost to clients and businesses, but it is worth it to ensure that it is more difficult to get away with cheating the system. Those who try to cheat the system aren’t just cheating the ATO & the government. They are also cheating those of us who are paying their fair share of tax.
We often have clients who meet all of their compliance requirements and pay their fair share of tax but still have further questions asked of them by the ATO. In that environment it’s not worth the risk to do anything other than the right thing.
SNR ACCOUNTANT – OPTIMA PARTNERS
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