Small business benchmarks
The ATO has released updated small business benchmark information, using data taken from income tax returns and activity statements lodged for the 2014 income year.
The ATO has released updated small business benchmark information for more than 100 industries. The latest benchmarks use data taken from income tax returns and activity statements lodged for the 2014 income year.
The ATO uses the benchmark information to identify businesses that might not be declaring all of their income or that may be avoiding some of their tax obligations. Practitioners can use the benchmark information to identify clients that may be at higher risk of ATO audit or review activity.
The benchmark information can basically operate as an early warning that clients might be subject to a higher level of ATO scrutiny. The information can also be useful from a commercial perspective as it can show clients how their business compares with other businesses in the same or similar industry.
Just because a business Falls outside the benchmarks doesn't necessarily mean that there is a problem, as there may well be good reasons for the differences. One of the important things is to try and identify those differences with the aim of showing that the client is fully compliant with the tax laws despite falling outside the benchmarks.
When a client's business is reporting above a benchmark, this suggests that expenses are high relative to sales. This could indicate that the business has high levels of wastage, the client is charging a lower mark-up than competitors, the business hasn't recorded all of its sales or maybe competitors have been able to source materials at a lower cost.
When a client's business is reporting below a benchmark, this suggests that expenses are low compared to sale. This could indicate mark-ups are higher than competitors, the business is very efficient and has low waste levels or expenses are not being recorded.
For more information about the small business benchmarks, please contact us on 02 9957 4033.
This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.