Tax problems when you make cash deposits in your bank account
If you make cash deposits in your bank account, it is more likely that you will get audited by the ATO. Therefore, before you make any significant cash deposits in your bank account, you should contact King Lawyers and get legal advice on your tax obligations under the law.
Unexplained cash deposits in your Australian bank account
If you regularly make cash deposits in your personal or business bank account in Australia, it is important that you get legal advice to ensure that you are correctly complying with your tax and record keeping obligations.
This is important because unexplained cash deposits in your bank account can be treated as income by the ATO and you may end up with a very large tax bill and heavy penalties by the ATO.
Ignorance of the tax laws is not a defence. You must understand and comply with your legal obligations in Australia. If you fail to do so, you are likely to get a big fine from the ATO. Also, in more serious matters, the ATO may prosecute you criminally. Therefore, this is an important issue that you should get legal advice on.
The ATO can get access to your Australian bank statements
The ATO has strong legal powers to access your personal bank information. Those powers allow the ATO to get your Australian bank statements directly from your bank. Therefore, any cash that you have deposited in your bank account may be subject to review and audit the ATO.
Reporting of cash transactions of $10,000 and more to AUSTRAC
Australian Transaction Reports and Analysis Centre (AUSTRAC) is an Australian government agency that monitors financial transactions to identify money laundering, organised crime, tax evasion, welfare fraud and terrorism.
All cash transactions of $10,000 and more must be reported to AUSTRAC within 10 days. This includes cash deposits of $10,000 and more in your Australian bank accounts.
For a tax audit, the ATO is able to get access to all reports made to AUSTRAC for cash transactions of $10,000 and more. Therefore, any significant cash transaction that you have made in Australia may be subject to review and audit the ATO.
Reporting of suspicious cash transactions to AUSTRAC
If you make suspicious cash deposits in your bank account and the bank forms a reasonable suspicion that are doing so to commit tax evasion or another crime, then the bank must report the suspicious bank deposits to AUSTRAC within 3 days.
For example, if you make regular cash deposits of $9,000 in your bank account, your bank is likely to still report those transactions to AUSTRAC as suspicious cash transactions, even though each deposit is under than the $10,000 threshold.
Unexplained cash deposits in your overseas bank accounts
If you are an Australian resident for tax purposes, then you need to pay income tax to the ATO on your worldwide income. Therefore, any cash deposited in your overseas bank account may be relevant to your Australian tax obligations to the ATO.
If you need to make a voluntary disclosure to the ATO about your foreign income or unexplained cash deposits in your overseas bank accounts, you should get legal advice from an experienced tax lawyer and act quickly before an ATO audit. Otherwise, the penalties are likely to be much higher after the ATO as started an audit of your tax affairs.
The ATO can get access to your foreign bank information
The Common Reporting Standard (CRS) is a new legal requirement for the automatic exchange of financial account information between your foreign bank and the ATO. The new laws came into effect on 1 July 2017. The first exchange of information occurred in 2018.
Under the CRS, your foreign bank is required to report the following information to the ATO regarding your foreign bank account:
- Taxpayer Identification Number (TIN)
- Date and place of birth
- Account number
- Name and identifying number of the reporting financial institution
- Account balance or value as of the end of the relevant calendar year (or other appropriate reporting period)
- The details of any accounts closed in the relevant calendar year (or other appropriate reporting period)
- Depending on the type of the account, information regarding dividends, interest, capital gains etc
If there is any inconsistency between the information reported by your foreign bank to the ATO and the information that you have personally reported to the ATO about your foreign income, the ATO may audit your tax affairs to investigate the discrepancy.
Voluntary disclosure to the ATO for unexplained cash deposits
If there are any unexplained cash deposited in your bank accounts, you should get legal advice on making a voluntary disclosure to the ATO about your tax affairs and deal with any tax issues as soon as possible before a formal audit by the ATO. This is likely to give you the best outcome with the ATO and minimise the heavy penalties.
You only get one shot at the voluntary discourse. Therefore, it is important to get it right and it would be best for you to engage an experienced tax lawyer to prepare and submit the voluntary disclosure to the ATO.
Finding of fraud or evasion by the ATO
If the ATO makes a finding of fraud or evasion against you for unexplained cash deposits in your bank account, then there is no time limit or restriction on how far the ATO can go back and audit you. For example, the ATO can audit all of your tax affairs for the last 10 or 20 years and issue you with a very large tax bill for that period.
To avoid that situation, it is important that you get legal advice on your tax affairs and meet your tax obligations in Australia.
Do you need an experienced tax lawyer to give you legal advice on cash deposits in your bank accounts?
This content of this article is offered as general information only and should not be relied on as specific legal advice on the tax implications of unexplained cash deposits in your bank accounts.
To get legal advice from King Lawyers on your specific circumstances, please contact us to arrange an initial consultation with our professional taxation lawyers.