Business tax changes vital for small-business growth
The ATO has released its latest small business benchmarks, providing over 100 different industries with average cost of sales and average total expenses. Businesses as varied as seafood retailers, bricklayers and dentists can see clearly what the relevant benchmarks are for their industry.
Assistant Commissioner Matthew Bambrick said that the benchmarks are a great way for businesses to see how they compare to others in their industry.
“Our benchmark data is from income tax returns and activity statements of over 1.4 million small businesses around the country. With such a large data set, things like locality and different business circumstances are included when we calculate the average range for each industry.
“Businesses can use these benchmarks not just to check that they’re getting their tax and reporting obligations right, but also to provide information to support their decisions on how to improve their profitability,” Bambrick said.
“We have seen examples such as a café bought for $45,000 that quadrupled in value within five years because the owners looked at the benchmarks and adapted their business, including a point of sale system that provided much improved reporting. This gave them a far better view of what was working and what wasn’t, both the menu and the opening hours – and the changes they made significantly increased their profit and the value of their business.
“Being outside the benchmarks may mean you’re doing something much better than your competitors or there may be areas you can improve on. The benchmarks are a great indicator to help gauge the health of your business.”
The quickest and easiest way to work out how you compare is by using the business performance check tool in the ATO app, which does the calculations for you.
“On our website, we have step-by-step instructions and a check list of the information you need to work out how your business stacks up. You can also talk to your registered tax agent if you want some help or have questions on what you may be able to do to improve your business performance,” Bambrick said.
He stressed that being outside the benchmarks can sometimes be caused by easily-fixed administrative errors.
“You may have recorded something under the wrong label, forgotten to include a figure, or used the wrong business industry code. Business industry codes can change over time as a business progresses or diversifies, so check that your code is still up to date. If businesses find they have made a mistake, they can contact us and make a voluntary disclosure.”
In addition to being a useful guide, small business benchmarks are also one of the tools the ATO uses to ensure a level playing field. The ATO uses tools like benchmarks and data matching to protect honest businesses from competitors who are trying to get ahead by avoiding their tax obligations.
To see how your business stacks up against the industry average, visit www.ato.gov.au/businessbenchmarks.