The ATO has a database of “small business benchmarks” against which it compares lodged information. But business owners can also benefit by using the small business benchmarks to compare their own performance.
It says the small business benchmarks:
- are calculated from income tax returns and activity statements from more than 1.3 million small businesses and are verified as being statistically valid by an independent organisation
- account for businesses with different turnover ranges (up to $15 million) across more than 100 industries, and
- are published as a range to recognise the variations that occur between businesses due to factors such as location and the businesses circumstances.
Anecdotally however, many tax practitioners do not consider these ranges to be realistic enough.
A large deviation from benchmark data (particularly if it is in the taxpayer’s favour, for example comparatively high operating costs) is prima facie more likely to attract ATO review.
The current benchmark information relates to 2013-14. This is the latest available data, and was released on June 24, 2016.
See this ATO web page for benchmarks A to Z (by industry type). The ATO says the small business benchmarks are financial ratios to help compare a business’s performance against others in the same industry. It also uses them as a guide on industry trends to identify businesses that may be avoiding their tax obligations by not reporting some or all of their income. Interested business owners can see this page to check how their own business is performing in relation to the ATO’s benchmarks.
Note also that the ATO app for smartphones (from Google Play, the Windows Phone Store or the Apple App Store) has a Business performance check tool. Business operators or their advisers can use the tool to check their business’s 2015-16 financial performance against already available benchmark data.