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The Australian Tax Office recently announced that they will be keeping close tabs on the performance of small businesses and subcontractors. The ATO has released more than 70 industry benchmarks for a wide range of business activities.
The benchmarks look at small business performance (sales, turnover and profit) and the value of costs and inputs (materials, wages, tools etc) and produce a series of guidelines and formulas that help small business owners – and the tax office – measure their actual performance against the benchmarks.
The purpose of benchmarks
- compare a business with others in the industry to assess performance
- check that tax obligations are being met, in particular the recording of all cash transactions
- work out if a business needs to adjust its record-keeping practices, and
- assess whether the Tax Office is likely to select a business for an audit or review.
- identify businesses that may be avoiding their tax obligations.
Two types of benchmarks for the small business sector have been developed by the ATO.
- performance benchmarks: based on information small businesses report to the Tax Office on income tax returns and business activity statements (BASs); and
- input benchmarks: based on information industry participants and trade associations provide to the Tax Office.
Who has been benchmarked?
More than 70 industries have been benchmarked including:
- Baking
- Bricklaying
- Cleaning
- Concreting
- Hair Dressing
- Painting
- Roof guttering
- Roof painting and repair
- Timber floor installation
Visit the ATO website for the complete list of benchmarked industries
What does it all mean?
To start with, your business performance will be compared to the average performance of your industry category, based on the information supplied in your tax returns and activity statements.
If your trading results do not conform to your industry’s norms, the data-matching system at the ATO will flag your business for tax auditing or investigation.
Don’t panic! We can help you.
We can compare your business with the industry benchmarks monthly, quarterly or annually. Contact us if you would like some more information.
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