The benchmarks were developed specifically by the ATO to provide a guide on the range of figures it would normally expect a small, medium or large business in a particular industry to report, including the expected ratio of income vs expenses.
Essentially, these prescribed benchmarks are all about catching businesses operating in the cash economy that are:
- ‘skimming’ cash takings
- paying cash-in-hand wages
- operating off-the-books, and
- not recording or reporting all sales and purchases
In a recent document entitled ‘Record keeping and cash transactions’ the ATO asserts that their benchmarks are all about record keeping. What this means is that, if your business doesn’t have the records to back up its reported income and expenses, and if it doesn’t fit the benchmark profile, the ATO will amend the tax assessment to match the benchmark.
If you have any concerns about the ATO’s cash economy benchmarking initiative with respect to your own business, please call OBT’s friendly team on 07 5462 2277.