Will this business attract more scrutiny or tax audits from the ATO in future?

A friend has placed a deposit on a hairdressing salon at Hornsby.  She has since found out that the a previous employee had informed the ATO for paying her cash wages and they were subsequently fined a substantial amount of money.  How does this affect the business going forward and will it mean more "attention" or audits from the ATO?

Top voted answer
Todd Dewey

Todd Dewey, Consultant at Oakton

I am not an tax expert however I don't believe that the history of the previous owner would have any impact on your friend. Your friend will be lodging returns under her company / sole trader ACN or ABN. My wife has a hairdressing salon and she was audited by the ATO last year. My understanding is that they target specific industries on a cyclical basis, which may mean you will not be targeted for a while. The ATO run a range of fairly sophisticated tools to assess cash v credit sales, wages per employee, wages per sales volume etc...., however every salon is unique so it is difficult to generalise. In the end if you are upfront with what you declare, then as we were, you don't have an issue - my tip is to ensure your friend retains adequate comprehensive records in addition to bank statements, till receipts or appointment books were helpful for us.