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Errors and over-claiming for work related expenses and the Tax Gap (Part 2)

In case you missed it, Tax Commissioner Chris Jordan made a public address on the 5th of July 2017 in which he spoke about the ATO’s plans moving forward, especially concerning tax gaps. Let’s take a brief rundown of the situation as it stands:

  • The ATO, for the first time is going to publish estimates for corporate tax and income tax gaps for different segments. They were previously publishing estimates for GST based gaps.
  • Their first release of these numbers was for the corporate tax gap calculated based on 2014-15 data, which is approximately $2.5 billion (a tax gap is the difference between what the ATO has collected and what it should have collected, were everyone compliant with the existing laws.)
  • This $2.5 billion tax gap shows that the ATO has collected about 94% of the corporate tax they should be receiving, 91% voluntarily declared and 3% through compliance intervention. While this is around global best practice, the ATO will continue to closely watch the 1400 businesses in that segment.
  • Their current aim for corporate tax is to work with taxpayers to encourage voluntary compliance and move away from the necessity for increased intervention.
  • The ATO is now dedicating more resources to other markets they believe, from their initial findings to have higher tax gaps. Namely; small businesses, the black economy (the cash economy) and the individuals market.

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3 useful tips for shop owners to mitigate risk of sales fraud

20% of our clients are in the retail & food industry or in a business using a Point of Sales (POS) system. Their daily transactions are composed of 20-30% cash and 70-80% Electronic Funds Transfer at Point of Sales (EFTPOS). Though the level of cash transactions may be seen as low, substantial fraud can often take place in cash transactions. According to the research undertaken by Inside Retail Australia, cash fraud penalties for some retail owners exceeded one million dollars.

If shop owners do not have an appropriate procedure for daily reconciliation,it is extremely troublesome to identify irregularities after a few weeks.Thinking of my first casual job as a student at a restaurant, I was responsible for reconciliation between a cash register and a POS system. This sometimes took up to 3 hours per day, but had been proven to be a worthwhile practice,for the restaurant as a small business. As EFTPOS became more popular, shop owners started to pay less attention to their cash revenue, which accelerated risk of fraud. Since owners largely rely on an auto-settlement system provided by EFTPOS providers,fraud in cash transactions have been much overlooked.Furthermore, shop owners may not have thought about potential fraud from EFTPOS transactions.

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End of Financial Year Note

Most business owners do not know that the SME sector in Australia has wasted millions of dollars due to inefficient cost, most of which can be attributed to the complex bookkeeping process. As the financial year is coming to an end, here is a guide to help business owners save the unnecessary cost and improve the company performance in a period when financial management is very much needed.

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To improve the existing financial management process, you will first have to evaluate the system. Take a minute and think about how you control your financial process right now. Most SMEs have the same mistakes listed below:

  • They fail to realise how important financial management is. Businesses with poor financial management tend to suffer from poor cash flow and profit margins, ineffective debtor control, and an inability to meet their business’ commitments;

  • They are unaware of alternative solutions such as hiring an accountant or implementing an accounting system. If crunching the numbers is not your strength, either hire or outsource to an accountant or bookkeeper who will deliver regular and reliable information and advice that you can use to manage your financial position;

  • While many businesses are in the field of IT, it is surprising how backward their accounting systems are. Stacks of receipts, manual ledger books, simple Excel sheets, messy financial transactions and reports, and overdue BAS and tax returns are common among start-ups with bad financial management;

  • Businesses owners tend to focus on their products, ideas, and clients, often neglecting the fundamentals of their business. I have never seen a successful business that does not have strong financial management.


As a matter of fact, most people fails to realize their mistakes until it’s too late. If you are a small business, it is highly likely that you need to do everything to manage your business, from administration, marketing to bookkeeping. It is seemingly running well and you believe you are able to manage it until the end of financial year approaches. One client shared with us that EOFY used to be her nightmare and she was always lost with massive paperwork. Only until the end of financial year does your disorganized bookkeeping system come back to bite you. To avoid this scenario, though, here is the EOFY to-do list from our executive director.

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