New ATO cash benchmarks aimed at start-ups

The Australian Tax Office has unveiled a category of small business benchmarks aimed at start-ups that handle a lot of cash transactions.

Bruce Quigley, second commissioner of that ATO, says the new benchmarks are used by the Tax Office to identify and deter non-compliance in the cash economy.

“These benchmarks are a useful way to help businesses compare their performance against other businesses in their industry and check they are meeting their obligations, including assessing whether they are likely to be selected for a review or audit,” Quigley says.

“Using these benchmarks, the ATO can determine the average proportion of cash sales a business should be making and which businesses are not reporting as much cash income as others in the same industry.”

This year, the ATO is contacting around 100,000 businesses which operate in cash industries, including restaurants and takeaways, hairdressing and beauty, clothing retailing, grocery retailing, and hardware and building supplies.

Quigley says businesses whose performances falls outside one or more of the benchmarks are likely to be selected for a review or audit.

The cash sales benchmarks are based on data matching undertaken with banks to identify credit and debit card sales, as well as information provided by small businesses to the ATO on activity statements.

The ATO says comparing a business against the benchmarks for its industry is only one way of identifying businesses for audit.

Other indicators include data matched from external sources suggesting inconsistencies in reported income; businesses that report net income that appears to be lower than required to support the business operator’s personal living expenses; and allegations of tax evasion sourced from the community.

The ATO says start-ups in particular need to ensure they meet the legal record-keeping requirements.

“If businesses find they are outside the benchmarks for their industry, they should work out if they have correctly recorded and reported income and deductions,” it says.

If your business is outside the benchmark, the ATO recommends you:

• Review your record-keeping practices.
• Consider how your business operates.
• Check to see if you made a mistake or failed to report all of your income and expenses in your tax returns or activity statements. If so, you will need to provide the correct information and notify the ATO by making a voluntary disclosure.