“If a small business is inside the benchmark range for their industry and the ATO hasn’t received any extra information that may cause concern, they can be confident that they probably won’t hear from us,” said Matthew Bambrick, ATO assistant commissioner.
“We know a lot of small businesses, advisers and industry associations use the benchmarks to gauge competitiveness, whether or not costs might be too high, or profit margins too low.”
If small businesses are outside these benchmarks, it may be because they have more waste than competitors, or spend more on materials, according to Mr Bambrick.
“Using the benchmarks as a guide, not only can [SMEs] identify where they are slipping behind but also how they can improve and build their business.
“For example, one business told us how their accountant used the tailored benchmarks to work out that their expense to turnover ratio was higher than other businesses with a similar turnover. Using this information, the business adjusted some of their inputs and how they were pricing their products. These changes resulted in an overall improvement in their performance.”
Two ways small businesses can get back into the benchmark range are to make sure they are correctly registered and to check if their business intent has been changed and updated.
Mr Bambrick suggests using last year’s tax return as a reference point.
“See which business industry code was used and then [update] it in the next return and on the Australian Business Register,” he said.
“We use tools like benchmarks and data matching to protect honest businesses from competitors who are trying to get ahead by avoiding their tax obligations.”
One way small businesses can check whether their business is within the new benchmarks is to use the ATO app.
“The business performance check tool on the ATO app also makes it quick and easy for small businesses to compare their own operations with industry benchmarks,” Mr Bambrick said.