ATO Small Business benchmarks
The Tax Office uses data aggregated from business tax returns and activity statements to determine profiles of businesses and industries. The profiles are then used as a compliance tool, to identify businesses whose financial performance has strayed from the norm, possibly pointing to a tax risk.
Mitigating tax risks
Tax risks are most notably identified in the cash economy, or businesses without adequate records. The Tax Office has powers to make up tax assessments in such cases (“default assessments”), and can use the benchmark data to make assumptions, or at least point them in a particular direction.
Businesses can also use the published profiles to compare themselves to industry averages for management purposes.
A business with a financial performance materially different from the Tax Office industry profile can expect (at the least) to receive a “please explain” request. It is important therefore, that business records and procedures are well-maintained, and in a way which can satisfy the burden of proof should a query ever be raised.
Mixed businesses, and businesses with unique circumstances or characteristics are unlikely to match the benchmark profiles, as are businesses within niche markets which are smaller (or potentially even broader) than the level of aggregation used in the Tax Office data. The published benchmarks are also based on historical data which is usually at least 1 to 2 years old.
This page was last modified 2017-11-10