ATO Small business benchmarks
Small business benchmarks are a guide to help you compare your business’ performance against similar businesses in the same industry.
- are calculated from income tax returns and activity statements from over 1.3 million small businesses and are verified as being statistically valid by an independent organisation
- account for businesses with different turnover ranges (up to $15 million) across more than 100 industries
- Are published as a range to recognise the variations that occur between businesses due to factors such as location and the businesses circumstances.
ATO updates the benchmarks each year using the latest available data.
What it means to be outside the benchmark
Your calculated benchmark might be above or below the range for your business turnover in your industry. If you have included all your income there may be reasons for this difference, such as higher costs or lower selling prices than your competitors.
When ATO sees a business outside the key ratio for their industry, it indicates something is unusual and it may prompt ATO to get further information from the businesses or their suppliers or customers or may even trigger full audit.
How ATO uses benchmarks
ATO uses benchmarks and other risk indicators to identify businesses that may be avoiding their tax obligations by not reporting some or all of their income.
Information reported in your business tax returns or activity statements is compared with the key benchmark for your industry, based on information such as:
- Your business industry code (derived from the ANZSIC code). If a business industry code includes more than one type of business, for example 32430 includes wall and floor tiling, carpet laying and floor sanding, we use the description of the main business activity and the business trading name to more accurately work out which particular benchmark is relevant
- the description of the main business activity on your tax return
- The trading name of your business.
If you run multiple businesses, ensure you complete information labels correctly on your income tax return to reflect more than one business.
ATO will only issue a default assessment when you are not able to provide accurate records or evidence that allows ATO to verify your business’ reported income, or if you refuse to lodge your tax returns after a number of requests.
If a business doesn’t have evidence to support their return, ATO may use the benchmarks to determine income that has not been reported. For each industry, ATO highlights the benchmark that ATO uses to predict income or turnover.
If ATO contacts you, ATO will ask you to confirm what you have reported in the return by providing records as evidence.
Correcting a mistake
If you find that you have made a mistake in your tax affairs, and not recorded some income or expenses, amend your tax and/or business activity statement to correct these errors as soon as possible.
You can do this by making a voluntary disclosure. If you voluntarily tell ATO about any errors or omissions, the tax law allows for a reduction in penalties. If you tell ATO before an audit begins, ATO may be able to reduce these penalties even further.
You may be selected for a review or audit
Benchmarks are one of the indicators ATO uses to identify – for review or audit – businesses that may be operating in the cash and hidden economy.
Expert Tax are registered tax agents offering a wide range of taxation services. We are based in Tarneit and service Tarneit, Truganina, Hoppers Crossing, Werribee, Wyndham Vale, Williams Landing and Point Cook.
For further assistance contact Expert Tax on 0449 952 855 or alternatively send us your query via our website – www.expert-tax.com.au
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