Tax and the Cash Economy

Recently the ATO took a taxpayer to court. The taxpayer had claimed that over a period of many years they earned next to no income.

After an ATO enquiry, their bank accounts were reviewed and – surprise, surprise – there were various regular large deposits in their account. Next step, the ATO hands down default assessments to the taxpayer. Many people don’t know that the ATO have the power to calculate your tax and assess you where they think you have done wrong. It was then up to the taxpayer to prove otherwise, with the time and expense of court. Guilty before proven innocent? Some would say that, but that’s tax for you.

Eventually the taxpayer was able to explain many of the deposits, but the lesson here is get it right the first time and do it right too. Those people who work in business with large cash takings need to know they will be subject to much more scrutiny and need to keep good records.

Dealing with an honest and open taxation adviser who dots all the “I”s and crosses all the “T”s is essential so that these things can be nipped in the bud. Get in touch with us to discuss your tax issues.

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