ATO targets cash-only hair and beauty businesses

Every year, the Australian Tax Office focuses resources on certain sectors of the economy that are seen as hotbeds of tax non-compliance.

This year, driven by a push from government to bring in extra tax dollars, the ATO has set its sights on the cash economy, and the hair and beauty sector has been earmarked for particularly close attention.

Why does the ATO have a problem with the cash economy?

Quite simply, in this day and age, when the use of debit and credit cards is ubiquitous, the ATO regards cash-only businesses as having only one reason to exist from an economic perspective and that is as a way of avoiding tax.

So although it isn’t illegal to operate a cash-only business, the ATO consistently finds under-reporting of takings, leading to failure to pay the right amount of income tax and GST. In addition, cash-only businesses often fail to account for tax and superannuation properly on their employees' wages.

The problem is regarded as particularly acute among hair and beauty businesses because about  58 per cent are cash only and the industry has the third highest number of reports about potential tax evasion. Read more