Small business benchmarking and the ATO

Small business benchmarking and the ATO

There has been increased ATO audit activity in the small business sector particularly where the ATO has used small business benchmarking. Benchmarks are financial ratios developed from information provided to the ATO on tax returns and activity statements. Below you will find some examples of some ATO benchmarks for a coffee shop business.

Example of ATO benchmarks – coffee shop business

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The ATO uses benchmarks to help compare a business against similar businesses in the same industry. It also helps identify businesses that may not be reporting all of their income (particularly where cash transactions occur).

In the absence of a satisfactory explanation, the ATO uses benchmarks to issue assessment notices for income it thinks has not been reported.

This means the onus of proof passes to the taxpayer to disprove the ATO assessment. Benchmarks have been published for businesses in more than 100 industries.

Cristy Houghton