Small businesses that operate in the black economy are being reported to the tax office in record numbers.

The ATO received nearly 60,000 reports of suspected tax evasion, the black economy or illegal phoenix activity from 1 July 2018 to 31 May 2019 – up 42% on the year before.

  • Under-reported income = 31% of referrals

  • Cash economy = 27%

  • Non-lodgment = 25%

  • Inadequate or no superannuation paid = 8%

  • Over-stating expenses = 3%

ATO assistant commissioner Peter Holt said the increase in black economy referrals suggested that honest small businesses have had enough of rivals getting an unfair competitive advantage by evading tax.

“Going on current numbers, we’re on track to receive over 70,000 community referrals before the end of this financial year,” he said.

“By way of comparison, we received over 51,000 referrals in 2017-18 and that was the highest ever number of referrals received.”

ATO making it easier to report dodgy small businesses

In related news, the ATO will make it easier for the public to make tip-offs when it launches the Tax Integrity Centre on 1 July.

This will provide a single point of contact for reports about small businesses that may be engaging in black economy, tax evasion and phoenix activity.

“Tip-offs are assessed and referred to experienced staff for review to determine if any action is required,” Mr Holt said.

“A community tip-off may be the missing piece of the puzzle that we need to finalise an investigation and seek prosecution action to help protect honest taxpayers.”