The plastering industry is one of many industries under investigation this year in an attempt to tackle the cash economy and uncover work completed ‘off the books.’
It appears that the plastering industry has become a rich source of small businesses that have gone around tax laws. Bruce Quigley, the Australian Tax Office Second Commissioner stated that “[i]n the audits we’ve undertaken already in the plastering industry, the average adjustment has been $30,000 tax that has been evaded.”
The ATOs investigation of the industry will commence through a data matching process that will identify those who operate within the cash economy. It involves credit card and EFTPOS sales data from third parties such as banks and plasterboard and cornice suppliers. This data is matched with data submitted to the ATO to link transactions with the relevant taxpayer. From here matches are assigned a level of confidence, of which only ‘high confidence’ matches continue to be automatically processed.
The remaining records are studied by software with the aim of matching records with ATO industry benchmarks. These are used to estimate the income range of the plastering business based on the quantity of supplies purchased. Any discrepancies then form the basis of further investigation via tax reviews and audits.
Quigley say however, “[t]here is nothing to fear if tax payers do the right thing. In fact, the crackdown will bring benefits for honest businesses that are currently at a competitive disadvantage.”
Last financial year, the ATO processed more than 500million third party data transactions using its corporate identity matching software. Businesses that appear to have purchased greater quantities of plasterboard and supplies than is comparable with their reported income or that appear to have purchased less than their reported income may be subject to further scrutiny.
The ATO is also warning that it will crack down on ‘phoenixing,’ whereby companies collapse, often owing large debts, only to rise again under a different name.
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