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ATO Benchmarking

Small business benchmarks are financial ratios the Australian Taxation Office (ATO) has developed to help compare the performance of similar businesses in an industry.

They are representative of returns and activity statements in the industry and provide guidance on what figures the ATO would typically expect a business in a particular industry to report.

Businesses reporting outside the benchmarks may attract ATO attention. There may be reasons for this difference, such as higher costs or lower selling prices than others in the industry, but it may also be an indication that a business is not recording and paying tax on all its transactions, especially cash transactions.  Another reason may be that your Industry Code as reported on your Income Tax Return is not exact, comparing apples with oranges.  You should review this on your Return and speak to your Accountant if you feel you are misreporting your industry.

The ATO may call or send letters to businesses it finds operating outside their benchmarks.  If you find you are outside the benchmarks for your industry, you should check that you have correctly recorded and reported income and deductions for your business. To do this you should review your record-keeping practices to ensure they meet the legal requirements.

As an additional service to the preparation of your annual Financial Statements and Tax Returns, BBA Accountants can review your business against your industry benchmarks to advise if you are at risk of ATO attention.  If you are legitimately operating outside these benchmarks, we can seek to provide analysis as to why and liaise with the ATO on your behalf to avoid any stresses to you and your business.

For more information on the ATO benchmarks by industry, click here .

The following is an example of benchmarking for the road freight transport industry:

Road freight transport services - issued 2014
Industry overview
Businesses in this industry are involved in shipping freight by road.

Performance benchmarks

These performance benchmarks are developed using information reported on income tax returns and activity statements for the 2011-12 year. Performance benchmarks are updated annually.

These benchmarks show a number of different financial ratios of business income to business expenses, to help businesses compare their performance against similar businesses in an industry. The key benchmark ratio for this industry is total expenses to turnover. This ratio is likely to be the most accurate predictor of business turnover.

Businesses operating outside the key benchmark may be contacted by ATO.

During an audit, if a business does not have records to support their reported income and expenses, ATO may use benchmarks and other information available to assess the profits of the business.

Key benchmark ratio

Annual turnover range

$50,000 - $200,000

$200,000 - $600,000

More than $600,000

Income tax return

Total expenses/turnover

54% - 73%

69% - 83%

84% - 93%

Average total expenses

63%

76%

88%

Activity statement

Non-capital purchases/
total sales

36% - 53%

45% - 60%

51% - 66%

Benchmarks are published as a range representing the ratios reported by businesses grouped either side of the average. Publishing benchmarks as a range allows for variations across financial years, regions and business models.

The following benchmarks are made available as a guide for businesses to review their performance and business practices against other similar businesses. The following expenses are not reported by every business, so one or more of these benchmarks may not apply to an individual business.

Benchmark ratio

Annual turnover range

Income tax return

$50,000 - $200,000

$200,000 - $600,000

More than $600,000

Labour/turnover

21% - 32%

15% - 25%

20% - 29%

Motor vehicle expenses/turnover

14% - 28%

8% - 31%

3% - 26%