Business Information Government Knows
There are many pieces of information that you may not realise and even be surprised to find out that the Government / Australian Taxation Office (‘ATO’) already knows. Even though you think you may not have to declare that cash income as no one will ever know, let us set the record straight here for you:
1. Who your business banks with.
When you open a business bank account the bank will ask you for the business’ Australian Business Number (‘ABN’) and even the business’ Tax File Number. The bank makes a declaration to the ATO that they have opened a bank account in the business’ name. If you do not provide the bank with the business’ ABN, a business account may not be able to be opened. If you do not provide the business’ TFN, the bank will withhold interest at the top marginal rate being 45%.
2. How much is in your business’ bank account.
The ATO is able to see everything in your bank account. It can see all the deposits, withdrawals, superannuation contributions, interest…EVERYTHING!!! So, if you think that you can hide from the ATO, think again.
3. Who you pay money to.
As the ATO (and many government departments) have data matching technology, the ATO is able to track the flow of money from one account to another. If you are thinking that cash will be the solution to all your problems think again. Firstly, they can look at one account to see that the cash has been withdrawn and then look at the other account to see the cash deposited. Secondly, if a business has been paid cash and you spend that cash on supplies, groceries, petrol etc, the ATO will question why each week you have purchased supplies but suddenly one week (or extended period of time) you haven’t utilised the bank account to make the same purchase.
As we are talking here about habits which sometimes are unconscious, they are difficult to break. You should be aware that the ATO is able to question the business, its owner or Director for a reason why, especially if the amount involved is significant.
4. What your GST and PAYG liabilities are.
As the ATO already knows what transactions have gone through your business’ bank account, the ATO already knows the amount of GST that your business has collected and paid out to suppliers as well as the amount of PAYG withheld from the pays of the employees of the business. Consequently, if a business does not lodge its Business Activity Statement, the ATO has the legal right to estimate the BAS and issue a notice to the business for payment of the GST or PAYG to the ATO. This may lead to a Creditors Statutory Notice being issued against a Company or a Bankruptcy Notice being issued against a sole trader or Partnership in extreme cases.
5. The relevant Directors of who a Director Penalty Notice may be issued to if GST and PAYG liabilities are not paid.
As many Government departments share information with each other, it is not difficult for the ATO to know who the Director(s) of a Company are at any given point in time. The ATO may hold a Director personally liable for the GST, PAYG and / or the Superannuation liability of a Company in certain circumstances.
As a sole trader or partners of a partnership are already personally liable for all debts including GST, PAYG and Superannuation, there is no need for a special provision to be made.
Even though the Government may know all of the above information about your business, there are ways to make business better, legal and avoid a Director Penalty Notice. If you want to know how, click here.