Tax avoidance tip-offs show no signs of slowing down, the Australian Taxation Office (ATO) says, as customers and staff blow the whistle on businesses hiding their obligations, under-reporting sales, and claiming dodgy deductions.
The tax office has now received 250,000 tip-offs related to suspected tax avoidance since July 1, 2019, with 47,000 heard in the last financial year alone.
Australians are sympathetic to the tough economic environment facing local businesses, says ATO assistant commissioner Tony Goding.
However, he says the figures show consumers and workers are happy to alert the tax office when things don’t look quite right.
“What it’s saying to us is that people have had enough,” Goding tells SmartCompany.
“Where people are seeing these types of behaviours, they are doing the right thing, letting the ATO know, because it’s the community’s expectations that we do something.”
The ATO says community tip-offs take many forms.
Many alert the ATO about old-school ‘cash-in-hand’ jobs, where employers pay wages without withholding tax from a worker’s pay.
However, the ATO also hears reports about unusual point-of-sale technology designed to underreport sales.
Australian society is moving away from cash transactions, meaning more sales are captured by digital POS systems that help businesses calculate their actual tax obligations.
To help dodgy businesses avoid paying the tax they owe, criminal networks are promoting electronic sales suppression tools (ESSTs) that modify digital sales records.
Customers and staff are now tipping off the ATO when they become aware such systems are in use.
“Insofar as receipts, we have seen instances where the restaurant or the business has slipped up and provided a receipt that actually indicates a different transaction [than] what appears to have occurred,” says Goding.
Tip-offs also raise questions about how small business owners can afford luxury lifestyle assets and expenses that aren’t commensurate with their earnings.
Not every big-ticket item purchased by a small business owner sets off alarm bells; Goding says third-party data can help the ATO explain major purchases through inheritances and other above-board funding.
“It’s not just, ‘Hey, you’ve got a fancy car. The ATO has got a problem with you,’” he says.
“It’s really adding up what we know about you from your income perspective, utilising those other data sources, and then having a look at those assets to go, ‘Does that look right?’”
Tax avoidance, by the numbers:
90%: The proportion of tip-offs related to tax avoidance deemed worthy of further investigation
1,000: The rough number of tip-offs related to suspected tax avoidance and other shady practices heard by the ATO each week
5,869: How many ATO tip-offs related to the construction sector in 2023-2024, the most of any single industry sector
9,745: The tally of tip-offs related to NSW businesses last financial year, more than any other state or territory
47,000: The number of tip-offs recorded in 2023-2024
250,000: The number of tip-offs heard by the ATO since July 2019
$23 million: In March, the ATO issued assessments for $23 million in unpaid taxes after raids on three businesses suspected of using ESSTs
$16 billion: The estimated value of tax owed but not paid each year due to tax avoidance.
(Source: Australian Taxation Office)
Although many Australians are tipping off the ATO, others may feel compelled to ‘help’ small businesses by going along with suspicious cash transactions or turning a blind eye to odd sales data.
Goding says helping one small business do the wrong thing will only hurt others down the line.
“The thing that I would say to people in those situations is, ‘What about the business down the road that’s not offering that, that’s in a similar position, that’s really battling to stay ahead of the game, and are doing legitimately?’” asks Goding.
“Is it fair that they should be disadvantaged by that type of approach?”
The ATO now estimates some $16 billion in tax revenue goes unpaid each year due to tax avoidance strategies like the old-school ‘cash-in-hand’ job, where employers pay wages without withholding tax from a worker’s pay.
“It’s no longer the little pub joke about having a go at the man and helping a few people out,” Goding says.
“This is money that was not going into essential services like hospitals, roads, the Australian Defence Force, et cetera.”
Acknowledging that not every tip-off relates to a business deliberately doing the wrong thing, Goding adds that support is available for SMEs struggling to keep up with their obligations.
The ATO may direct businesses in that category to undergo further training in areas like record-keeping and cashflow management, instead of facing significant penalties.
“Of course, we’re going to bring you up to account on the tax that you owe us,” says Goding.
“We can’t walk away from that, but we can use tools like [directions to educate] to avoid giving you a big whack over the back of the head.
“The last thing you want people to do is ‘ostrich’, to put their head in the sand and hope it will go away,” the assistant commissioner continues.
“But I would say, from a level playing field perspective, we are well resourced and committed to tackling those people that deliberately do the wrong thing.”
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Senior Business Journalist
Focused on the small business sector, David’s work covers the political, regulatory, and economic issues facing Australian entrepreneurs. Prior to joining SmartCompany, he was a reporter for Business Insider Australia. You can follow him on LinkedIn.
