WARNING: The ATO will investigate 4,000 businesses in the next 4 months

The ATO is cracking down on the black economy. (Photos: Getty, AAP)

The Australian Tax Office has flagged that it will be visiting businesses all around Australia as part of its crackdown on the black economy.

The visits are part of an effort to “protect honest businesses from unfair competition by addressing black economy activities”, an ATO spokesperson told Yahoo Finance.

Between now and 30 June 2019, the ATO will be conducting 4,000 visits to Australian businesses.

A further 10,000 visits are scheduled for the 2019-20 financial year, the spokesperson added.

The black economy costs the community up to $50 billion, or 3 per cent of Australia’s GDP, ATO assistant commissioner Peter Holt said.

What are they looking for?

If you’re lucky enough to receive a visit from the tax office, expect questions about your operations.

“ATO staff will be talking to local businesses to understand how they operate and identify any issues where help is required,” the ATO spokesperson said.

But if you’re not doing anything wrong, there’s no reason to break a sweat.

“For businesses that are genuinely trying to do the right thing, we will be providing education and assistance to help them get back on track.”

“The visits can help us identify who needs extra support to make it easier for them to comply,” the spokesperson said.

“It’s all about protecting honest businesses from competitors who are trying to get ahead by avoiding their tax obligations”.

What counts as a ‘red flag’?

The ATO today released a set of benchmark data designed to help small businesses compare their performance with competitors in order to assess their business strength.

Businesses that operate outside those benchmarks – which have been likened to “the red and yellow flags on the beach” – can expect to attract the attention of the ATO, who may suspect them of engaging in the black economy, Holt said.

“A frequent red flag is a business reporting minimal profit while the business owner seems to be maintaining a lifestyle far exceeding their personal income.”

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