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ATO's research on Direct Selling Industry at odds with Cash Economy Report

Publication date: 13 Jun 97 | Source: THE TAX INSTITUTE

Recent research by the Australian Tax Office into the Direct Selling Industry which releases some distributors of having to keep any business records or pay tax on their earnings appears to be at odds with the ATO's own Cash Economy Report released early in June, according to Taxation Institute of Australia President, Mr Richard Gelski.

"In a letter to tax agents who have Direct Selling Industry clients, the ATO's Assistant Commissioner Pledge stated that distributors who receive payments below a certain level will prima facie be considered not to be carrying on a business and....will not be expected to include details of their activities in their income tax returns," Mr Gelski said.

"This sends a message to a wide cross-section of the community that undertaking direct selling businesses such as Amway, operating on a cash basis, does not have any tax consequences for most people."

"This contradicts the ATO's Cash Economy Report which labels the cash economy a major cost to the Australian community in lost revenue (possibly up to 15 billion annually) and an unfair shouldering of the tax burden."

"By encouraging people to think that their activities are not in the nature of a business, the ATO is sending the wrong message to budding entrepreneurs that there is no need to keep business records for tax purposes," he said.

According to Mr Gelski, the taxpayer is stuck in a Catch-22 situation.

"Unless taxpayers keep records they can't comply with their obligations as taxpayers. But when the ATO tells them that the fruits of their activities are not taxable, many taxpayers will not see the point of keeping the kinds of records that are required for normal tax purposes," Mr Gelski said.

"The Taxation Institute calls upon the government to issue introduce clear rules to help taxpayers determine the status of their income earning activities."

"Whilever an individual taxpayers position is uncertain, taxpayers are unlikely to take their tax affairs seriously," Mr Gelski said.