Are you dealing in a cash economy business? Be-Aware!
Receiving cash payments for businesses and individuals is legal and convenient. However, you still need to be aware of the inherent risks.
Generally, cash sales and purchases are very common in a small business day to day operations. It is very convenient for a business to spend the cash they receive. This is exactly where the issue arises. Keep in mind that two transactions are happening here. The first is receiving the money. The second is spending it. Both transactions need to be recorded accordingly.
Receiving and spending cash is quite tempting for a small business owner. It can also be hard to trace.
In this case, there is an inherent risk. The business might not report the full sales amount. Or it might not report cash sales at all. This leads to an underpayment of tax.
The ATO uses benchmarking and other means to evaluate how much income you may have generated from your business. To estimate the income, ATO looks at your business expenses as well as personal living expenses as a guide to see how much you have spent. Also if you purchased a property or sent money overseas, the tax office can avail these records with ease. To spend that money you need to have earnt it. If there is a discrepancy in what you have reported as assessable taxable income and what you are actually spending, you are in a spot where you might receive ATO officers at breakfast one morning asking questions and interviewing you for your business’s activities.
Some industries such as Restaurants and Cafes, Carwash, Cleaning, Trade professionals and Construction, are on the ATO’s radar as part of the cash economy crackdown and task force targeting the cash economy.
If you are in such a business and need advice relating to record keeping, bookkeeping and accounting and/or advice in regards to how to mitigate risks, we are certainly able to help. Kindly contact our office and we shall be more than happy to schedule an appointment with one of our friendly accountants to help you create a bookkeeping/recordkeeping strategy for your business.
Please feel free to give us a call on 03 8609 1889 and we will address your concerns.