ONE in every five businesses in the Wagga region may be deliberately hiding income to avoid paying tax and superannuation, the Australian Taxation Office (ATO) claims.
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Businesses in the building and construction industry, restaurants and cafes, hairdressers and beauticians are more likely to be involved, the ATO said in a statement.
The estimate is based on statistics compiled for the ATO.
"We know the majority of businesses meet their obligations and pay their fair share of tax," ATO senior assistant commissioner Michael Hardy said.
"However, unfortunately, there are still businesses that deliberately pay cash-in-hand wages, fail to pay their employees' super and do not report all their income."
According to the ATO, more than 700 businesses in the Wagga region may be deliberately hiding income.
The ATO said the rate - 20.6 per cent - was consistent with other areas of NSW.
A Wagga building and construction business was recently penalised more than $20,000 for avoiding taxes, the ATO said.
The unidentified company is being held up as an example of what can happen to businesses that do not comply with their tax obligations.
The ATO said the Wagga company was subject to a recent audit.
"The business was identified by operating outside the small business benchmark for their industry and reported income that was lower than expected to meet personal and business expenses," the ATO said in a statement.
"The audit found that the business owner was undercutting others in the industry.
"In total, the business had avoided almost $40,000 in taxes."
ATO senior assistant commissioner Michael Hardy said those businesses had been identified as potentially being in the "cash and hidden" economy.
The ATO said it has a range of tools to identify businesses not doing the right thing.
