Small businesses in northern Western Australia that operate in the black economy might be in for a nasty surprise.

The Australian Taxation Office will visit about 700 small businesses in Broome, Derby and Kununurra in August as there are “some tell-tale signs of black economy behaviour” in those towns.

ATO assistant commissioner Peter Holt said the visits would help protect small businesses from unfair competition.

“Black economy signs that we look out for are things like not being registered for GST or pay-as-you-go withholding, lifestyle and assets far exceeding reported business income, or a lack of merchant payment facilities like EFTPOS,” he said.

“We understand that some businesses may not have merchant payment facilities due to individual circumstances. The issue is when businesses are deliberately ‘cash only’ to avoid reporting all their income. By detecting and addressing this behaviour, we’re helping to keep things fair for honest small businesses.”

Another reason the ATO is visiting Broome, Derby and Kununurra is because it has received tip-offs about small businesses paying their workers in cash, according to Mr Holt.

The ATO is also targeting NSW small businesses in the regional communities of Port Macquarie and Wauchope.