The ATO warns of a $16 billion cash avoidance scheme

Businesses have been warned the community is ‘fed up’ with dodgy tax practices including using cash as means of tax avoidance, and they’re being dobbed in in huge numbers.

The shadow economy – people and businesses that have legal and illegal economic activity that is not reported or taxed – is estimated to be costing the Australian economy around $16 billion in unpaid taxes each year.

Australian Taxation Office (ATO) Assistant Commissioner Tony Goding said Australians are fed up with dodgy behaviours in the community and are stepping up to help level the playing field by tipping off the ATO about taxpayers not declaring income, demanding cash from customers, paying workers in cash to avoid paying tax and super, not reporting sales, and where someone’s lifestyle doesn’t appear to match their income.

“The number of reports we have received tells us that Aussies have had enough. Dodging your tax obligations clearly no longer passes the pub test,” Mr Goding says.

“We’re receiving tip-offs from other businesses, customers, members of the community, employees, and even family and friends,”

According to the ATO’s figures, more than 47,000 Australians have tipped-off the tax man during the 2023-2024 financial year alone, with businesses handling or accepting cash only being a major issue.

“It’s not just about ‘cash only’ or ‘EFTPOS out of order” signs,” Mr Goding said.

“These businesses are deliberately undercutting their competitors and gaining an unfair advantage in their industry. People who cheat their competitors and the community will likely try to cheat their customers too.”

Building and construction, cafes and restaurants and hairdressing and beauty services topped the list of industries the ATO was tipped off about in 2023–24.

15,516 tip-offs were received from New South Wales residents in 2023–24, followed closely by Victorians (11,256 tip-offs) and Queenslanders (10,629 tip-offs).

Despite having a number of ways of tracking data to recover unpaid taxes, Mr Goding notes it is community tip offs that are one of the ATO’s best sources of information when it comes to tackling the shadow economy.

He says his organisation receives around 1,000 tip-offs per week, with roughly 90 per cent of tip-offs analysed by the ATO in 2023–24 were deemed as being suitable for further investigation.

“A tip-off can provide the ATO with crucial information it needs as part of an investigation, sealing the fate of those who intentionally do the wrong thing,” Mr Goding said.

The ATO is taking particular aim at dodgy electronic sales suppression tools (ESST), which are a device, software program or other thing that can interfere with a business’ sales records electronically. This allows sales and income to be under-reported, meaning these businesses will have a lower tax bill at the end of the financial year.

In March, the ATO uncovered businesses using ESSTs to avoid paying tax to the tune of $23 million.

The ATO says this result wouldn’t have been possible without community tip-offs.

This investigation was carried out by specialised teams and task forces within the ATO, including the cross-agency Shadow Economy Taskforce

Deputy Commissioner Will Day said the recent activity demonstrates the ATO will take strong action against businesses who deliberately engage with illegal ESSTs.

“We want businesses to know that if you’re deliberately using tools or software to evade your taxation obligations, this is illegal, and we are taking the necessary steps to deter this behaviour,” he said.

“Businesses using or promoting this technology are effectively stealing from the Australian community, and that’s simply not on.”