The ATO is ‘cracking down’ on businesses that use cash to avoid meeting their tax, employer and business obligations.  Businesses that do this may:

• fail to report all sales transactions and fail to issue receipts;
• avoid paying GST, income tax, PAYG withholding, super guarantee, insurance and work cover protection;
• report their income below the $75,000 threshold to avoid registering for GST;
• exploit workers by not meeting award conditions and work cover protections; or
• undercut honest businesses by offering cheaper prices for cash.

The ATO warns that workers who are paid cash-in-hand or working ‘off the books’ are often disadvantaged.  Apart from not receiving the entitlements they should be, if they are injured at work, they may not be protected.

Taxpayers who are registered for GST can claim GST credits (or ‘input tax credits’) for the GST included in the price of goods and services they buy for their business.

However, if they buy something for both business and private use, they need to apportion their GST credit to only claim the business use.

For example, if they buy a car for ride-sourcing (e.g., to use as an Uber driver), they should work out the percentage they use it for business purposes and only claim a GST credit on that amount.

When completing their next BAS, the ATO is asking taxpayers to remember that they cannot claim GST credits for purchases:

• where they do not have a tax invoice;
• that were cancelled or reversed; or
• that do not have GST in the price (such as bank fees).

Taxpayers that have nothing to report still need to lodge a ‘nil’ BAS by the due date.

Please contact our office if you require assistance with any of this, including potentially using ‘annual private apportionment’ to account for the private portion of your business purchases.

The ATO is reminding taxpayers that receive government payments for delivering services under a Commonwealth program, such as healthcare, disability support or child care, that they have an obligation to:

• keep accurate records; and
• report any such income they receive in their tax return.

The ATO recently advised that it would be contacting taxpayers and tax agents in February by email to ensure that income received from government agencies (such as the Aged Care Subsidy or under the National Disability Insurance Scheme) is reported correctly in their tax returns.

The ATO has updated its Government Payments Program data-matching program protocol to better detect non-compliance, and work more effectively with other government entities.

Through data matching, the ATO is seeing some contractors incorrectly reporting or omitting contractor income.  Contractors need to report all their income in their tax return, including payments made by businesses for their contracting work.

Note that, as part of the taxable payments reporting system (‘TPRS’), certain businesses must lodge a ‘Taxable payments annual report’ (‘TPAR’) to report payments made to contractors for providing the following services:

• building and construction;
• courier;
• cleaning;
• information technology;
• road freight; and
• security, investigation or surveillance.

For taxpayers who work as a contractor and provide any of these services, the business they contract to should be reporting those payments to the ATO on their TPAR.  Contractors obviously then need to include this income on their tax return.

If the ATO suspects a contractor may have omitted TPRS income on their tax return, it may contact them to request they amend their tax return.  If the contractor does not take action, the ATO may conduct a review and audit of their business, and penalties and interest may apply.

The Government recently passed legislation to extend the $20,000 instant asset write-off for small businesses by 12 months to 30 June 2026.

Taxpayers should note that if their business has an aggregated annual turnover of less than $10 million, they may be able to use the instant asset write-off (‘IAWO’) to immediately deduct the business portion of the cost of eligible assets which cost less than $20,000.

Eligible assets must basically have been first used (or installed ready for use) between 1 July 2025 and 30 June 2026.  The $20,000 limit applies on a per asset basis, so taxpayers can instantly write-off multiple assets.

The IAWO can be used for both new and second-hand assets (but some exclusions and limits apply).

Please contact our office if you require assistance regarding the above, including in relation to also claiming deductions for improvement costs for certain assets.

The Administrative Review Tribunal (‘ART’) recently disallowed a taxpayer’s claims for many different types of work-related expenses.

The taxpayer was employed full-time as an engineer, working from home two days a week.  For the 2023 income year, he claimed deductions totalling over $61,000, in relation to (among other things) car expenses, travel expenses, clothing expenses, and home office expenses, all of which he claimed were work-related.

The ATO largely disallowed these deductions, and the ART affirmed the ATO’s decision, primarily due to problems with substantiating these claims.

For example, in relation to the car expenses, the ART noted that none of the log books were contemporaneous, and the log book entries were inconsistent with independent records (e.g., car service records).

In relation to travel expenses (taxi and Uber fares), the ART noted that the taxpayer did not provide evidence clearly identifying which travel expenses had been reimbursed by his employer, and the ride share documentation did not include the date, time or destination of travel.

In relation to home office utility expenses, the ART noted that the taxpayer only provided calculations estimating the business use proportion of those expenses, without providing any documentary evidence to substantiate the expenses themselves. In any case, the ART was not satisfied that the taxpayer’s apportionment of those expenses was fair and reasonable.

The ATO has advised that it will acquire child support data from Services Australia for the 2025 to 2027 income years, including the following:

• client identification details (names, addresses, phone numbers, and dates of birth); and
• child support details (child support identification reference number, child support role type, and child support category).

The ATO estimates that records relating to up to 300,000 individuals will be obtained each financial year, which will be matched against ATO records.

The objectives of this program are to (among other things):

• allow Services Australia to more accurately assess child support obligations, and maximise opportunities to collect child support debts; and
• identify and educate individuals who may be failing to meet their lodgment obligations and help them to finalise their lodgment obligations, or notify the ATO that an income tax return is not required.

Taxpayers should note that GST credits and fuel tax credits will expire if not claimed within the 4-year credit time limit (i.e., generally four years from the due date of the original BAS in which the taxpayer could have claimed them).

Once credits expire, the ATO has no discretion or ability to amend the assessment to include those credits.

The 4-year credit time limit is different to the period of review and applies more strictly.

There may be situations where the ATO is able to amend for overpaid or underpaid GST or overclaimed credits, but additional credits cannot be included in an amendment assessment.

If credits are near expiry, instead of writing to request an amendment, taxpayers should consider:

• claiming the credits in their next BAS that is still within the 4-year credit time limit;
• requesting the amendment by lodging a revised BAS for the tax period to which the credits are attributable (these are generally processed faster than amendment requests in other forms); or
• lodging a valid objection against their assessment for the period to which the GST credits are attributable before the end of the 4-year credit time limit.

If you identify any unclaimed input tax credits, we can assist with actioning the above options to try and ensure the credits are not lost.

The Administrative Review Tribunal (‘ART’) recently held that a taxpayer had carried on an enterprise of dog breeding for GST purposes.

He had lodged activity statements for the quarters ended 30 September 2018 to 31 December 2021 inclusive, claiming input tax credits (‘ITCs’) for the dog breeding activities he carried on from his home (among other activities).

The ATO disallowed the taxpayer’s claims for the above periods, arguing that enterprises were not carried on, and that there was a lack of appropriate substantiation (among other reasons).

The ART however held that the taxpayer’s dog breeding operation was an enterprise for GST purposes, noting that his activities had “the necessary commercial character.”  Therefore, the taxpayer was entitled to ITCs for that enterprise.

However, the ART affirmed the ATO’s decision to reduce the taxpayer’s other ITC claims, such as in relation to stamp duty on the acquisition of a property and for café and grocery expenses.

The ART also admonished the taxpayer for apparently using artificial intelligence in the presentation of his case, as he appeared to rely on cases and principles that did not exist.

The Government recently announced that it was delivering on its commitment “to mandate cash acceptance for essential purchases by finalising regulations that require fuel and grocery retailers to accept cash from 1 January 2026.”

The changes mean that, from 1 January 2026, most food and grocery retailers must accept cash for in-person transactions of $500 or less between 7am and 9pm.

Small businesses with aggregate annual turnover under $10 million are generally exempted from this mandate.  However, this mandate still applies to small businesses that choose to share a trademark with a large retailer.

The Government noted that, in addition to the cash mandate for fuel and groceries, consumers also already have the option to pay their bills, including utilities, phone bills and council rates, in cash at their local Australia Post outlet through Post Billpay.

The Government will review this mandate after three years, to ensure it is functioning as intended