Small businesses whose figures sit well outside industry norms have been put on notice, after the Australian Taxation Office (ATO)...
Read MoreThe ATO’s small business benchmarks show typical financial ratios for businesses of similar size operating in the same industry. They cover measures such as cost of sales to turnover and total expenses to turnover.
The 2023–24 benchmarks cover 100 industries and are based on tax return and activity statement data from more than 2 million Australian small businesses.
Being outside the benchmark range does not automatically mean your business has done anything wrong. However, it may increase the likelihood of the ATO reviewing your tax return or asking for further information.
No. The ATO says the benchmarks are not used in isolation. It also considers information from data matching, tax returns, activity statements, third parties and community tip-offs.
A business may sit outside the range because of higher local costs, a different business model, unusual trading conditions, rapid growth, start-up expenses or one-off events.
Start by checking that your income and expenses have been reported correctly. Pay particular attention to cash sales, wages, superannuation, cost of sales and any expenses that may have been entered in the wrong category.
The ATO warns that business owners sometimes incorrectly include their own wages and superannuation in expense calculations. These amounts may need to be reported separately, depending on the business structure and tax return.
Errors should generally be corrected as soon as possible. Making a voluntary disclosure before the ATO contacts you may reduce penalties that could otherwise apply.
Keep records that explain the difference, including invoices, payroll records, supplier costs, contracts, pricing changes and evidence of unusual business conditions. Good records can help support your position if the ATO asks questions.
Yes. A registered tax professional can help confirm whether the figures are accurate, explain why your business sits outside the benchmark and advise whether an amendment or voluntary disclosure is required.