Cheating GST payments from ATO for small businesses

Cheating GST payments from ATO (Australian Taxation Office) is an offence in Australia and you could go to jail for that. Don’t ever try to do this =P If you did and you’re not caught yet, stop doing it.

Thank you for reading this. It’s my first year doing accounting in high school so I have not learn much yet. I figured out a way to cheat GST payments from the ATO (Australian Taxation Office). This would pretty much works on small business only.

Goods and services tax (GST) is a broad-based tax of 10% on most goods, services and other items sold or consumed in Australia. When a business buys stocks from its supplier for, lets say $100,000 + $10,000(10% GST) for a total of $110,000. The supplier has to pay the ATO $10,000 tax out of the $100,000 they received and the business gets to claim $10,000 tax refund from the government. If the business sells its stocks for $220,000 (including GST), the business has to pay $20,000 to the ATO so basically, the business has to pay the ATO $10,000 ($20,000 – $10,000).

However, when the business experience stock loss (the owner usually just issue a memo), which means the business didn’t sell its stock, the business still gets to claim GST from the ATO. When you made a sale and record it as a stock loss, you can cheat taxes from the ATO…

Example:
My Business has $110,000 cash. My Business purchased $110,000(including GST) worth of stocks from their supplier which they intend to sell all of them for a total of $220,000 (including GST).

After selling their stocks and recording them the legal way, My Business will receive $10,000 from the ATO and has to pay $20,000 to the ATO, which means the business has to pay $10,000 to the ATO. The business now has $220,000 cash and after paying $10,000 to the ATO, the business will have $210,000 remaining. Assuming there was no expense incurred, My Business made a profit of $100,000.

Now, see what happens when My Business recorded a stock loss when they actually made the sale:
My business will receive $220,000 cash (not recorded) and the ATO still owes them $10,000. Which means they have $230,000 cash now. Assuming there was no expense incurred, My Business made a profit of $120,000!

$20,000 difference, wow…

As we’ve always been told, nothing is perfect. It’s a beautiful thing that nothing is perfect, is it?

Why this system won’t work perfectly,
1) When reporting a stock loss to the ATO, someone working from ATO will audit your business reports because a large amount of stock loss is unusual. But, if you’re recording a minimal stock loss and evaded tax, you’ll gain some profit which is not worth comparing to how long you’ll be in jail if you get caught.

2) If you’re stupid enough to issue the customer a receipt or invoices when you made a sale which you recorded as a stock loss, some of the customers who are smart enough to claim expenses tax from the ATO will have to provide receipts to the ATO who will once again audit your firm; which issued the customer a receipt but didn’t have any stock for sale.

Cheating GST payments from ATO for small businesses

redchipmunk

Wantirna, Australia

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Artist's Description

Had been thinking about this since March 2009. I’m in year 11 and this is my first year doing Accounting in high school. Was bored so I decided to write and post this work. Comments appreciated, thanks.

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