The Australian Tax Office received over 22,900 reports about suspected tax evasion in the six months to 31 December 2005. Reports with enough information for follow-up action or investigation led to over $26 million in tax and penalties being raised.
The most common reports were about:
* irregularities in pay as you go (PAYG) withholding – some businesses are not withholding an amount from payments to employees or are not sending in withheld amounts
* business income not being declared
* businesses in the cash economy
* income tax returns not being lodged, and
* non-business income not being declared.
People making reports about tax evasion included current or former employees, friends or acquaintances, current or former spouses or partners, customers of the business being reported and third parties who overheard something.
The five industries reported most often were:
* building and construction
* retail trade
* cafes and restaurants
* property and business services, and
* manufacturing.
Topics recently reported
* Businesses not declaring all of their cash income. Businesses must include all income in their tax returns, whether it is in cash or another form.
* Employees not being asked to complete a Tax file number declaration (form number NAT3092) and where necessary a Withholding declaration (NAT3093) so that the appropriate PAYG withholding amounts can be withheld.
o Every employee should complete a Tax file number declaration. Their employer should then complete the payer section of the declaration, send the original to the Tax Office within 14 days of the employee starting work, and keep a copy.
o Every employee should also give their employer a completed Withholding declaration if any adjustments need to be made to the standard rate of withholding.
What have the ATO observed in the community?
We are receiving calls alleging that some GST registered trades people are not providing tax invoices. Some consumers are tempted to pay cash and not ask for a tax invoice, but then find they have a problem if the work is faulty, or if they need to make a warranty or insurance claim.
Some tax evaders who were recently caught
A bricklayer was reported as not lodging activity statements for over a year. Our investigations resulted in over $47,000 in tax and penalties.
A restaurateur was reported as not meeting superannuation obligations to eligible employees and not sending the PAYG withholding amounts retained from payments to staff. The investigation resulted in over $78,000 in tax and penalties.
Individuals involved in the property and construction industry were reported to be claiming personal expenses for such things as a nanny, travel and extensions to their own home as business expenses. Investigations by ATO staff resulted in over $500,000 in tax and penalties.
An entertainment promoter was reported to be paying employees cash wages without withholding and sending amounts from payments. Investigations resulted in over $900,000 in tax and penalties.
A security company was reported to be only withholding 50% of the pay of its employees through the use of two time sheets. Investigations found one time sheet showing actual hours worked and the other showing half the hours which was used to record payment and tax for the mostly full-time employees. The investigation resulted in over $6 million in tax and penalties.
From ATO press release