TAX NEWS - 2010

Australia Tax: Tax office targets small business

More money in the federal budget for the tax office is likely to translate into less in the pockets of some small business people.

The Australian Taxation Office revealed today that it will be using the extra funds to triple its efforts to penalise those operators who use cash transactions to avoid paying tax.

"We expect in the coming 12 months to review or audit around 26,000 micro businesses that mainly operate in the cash economy," said the ATO's second commissioner Bruce Quigley.

He says a Federal Government funding boost to the ATO's compliance arm is the main driver behind the crackdown.

"It is an area of risk. It is an area we've identified over a number of years as an area of risk. We've had limited resources. We've now been provided with extra funding to increase our focus in that particular area," he added.

"As well as that we've had over the last 12 months or so an increase in our data matching capability which allows us to identify businesses that potentially aren't returning all the income that they should."

He says the ATO believes the economic downturn may have forced more businesses to look at ways to save money by avoiding tax obligations.

"We certainly have got evidence that during the economic crisis some businesses dropped the ball as far as their obligations to pay to the tax office the amounts that they collect from their wages and also not follow through on their obligations to pay their superannuation guarantee on behalf of their employees," he said.

"Effectively they have used that money for working capital in their business."

Last year the tax office uncovered $100 million in unpaid taxes from small firms. Audits of large companies reaped $1 billion.

Offshore transactions will remain a focus, and more Australians who are worth more than $30 million will face scrutiny.

However, some small enterprises are annoyed by the attention on their sector.

"Bureaucratic speak for we need to collect more money, we've got a big black hole to fill," said Scott Driscoll, who is the national president of the United Retail Federation.

"We've seen this Government really treating the small business sector again now with another audit in this form of a tax audit as the cash cow."

But the Council of Small Business Organisations of Australia, which exclusively represents small businesses, is unconcerned by the scrutiny.

"If they've identified 26,000 businesses that proves that small business in Australia is fantastically honest because there's 2 million of us roughly and 26,000 is just a blip," said its executive director Peter Strong.

"It sounds like an awful big number, but it's not when you compare it to how many of us are out there."

The ATO says struggling small businesses will continue to receive interest free payment arrangements for the next 12 months if they ask for assistance.