The environment is hardening against those who seek to hide or extract income tax-free. Here’s how to ensure your clients are correctly accounting for their income and use of assets.

The Australian Taxation Office (ATO) is increasing its scrutiny of small businesses’ tax affairs through the tax gap random audit program and its wider efforts to eradicate the black economy.

The regulator has an ever-growing bank of information at its fingertips and is actively investing in its data capability. 

It is increasingly able to crosscheck and risk assess the flow of funds within closely held groups.

This includes matching data from the taxable payments reporting system (TPRS), Single Touch Payroll (STP), land titles, motor vehicles and bank accounts against group structures to better identify incorrect reporting and unexplained wealth.

Data matching has highlighted that small business owners operating through companies and closely held structures may not be correctly reporting the use of company funds and assets by company directors, shareholders and their associates.


The compliance landscape is changing for small businesses with the removal of deductions for unreported directors’ fees and increased reporting visibility through the TPRS and STP. 

We expect that the Modernising Business Registers program will also improve the quality of company and director information held by the federal government. 

In addition, the JobKeeper and Cash Flow Boost stimulus packages also resulted in many taxpayers bringing their lodgment and reporting obligations up to date.

These growing connections between different tax and transfer policies, reporting requirements and government agencies mean that the environment is hardening against those who seek to hide or extract income tax-free.


In its general guidance, the ATO outlines five ways to properly use company money or assets for private purposes:

  1. salary, wages, or directors’ fees
  2. repayments of a loan previously made to the company
  3. a fringe benefit
  4. dividends
  5. a loan from the company.

The ATO’s detailed business record-keeping requirements can also assist in educating clients about its expectations for small business records and which can be used to develop good practices for your clients to make tax time easier.

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