ATO benchmarking small business

The ATO's new benchmarking process (which sets out average income and other benchmarks for 100 industries) means that, for small businesses, the detail and the quality of taxpayers' record-keeping is about to take the spotlight.

The message from the ATO is clear: keep good records and the taxpayer has nothing to fear. 

Fail to keep good records and the onus will be on the taxpayer to prove the ATO wrong, if and when they apply the benchmark and issue a default assessment.

What the ATO has to say

The ATO says that in dealing with the cash economy it isn't their intention to issue arbitrary default assessments, and that there is a robust process they follow in relation to benchmarking audits. 

The ATO has every intention of ensuring that taxpayers who report figures that do not line up with the benchmarks become aware that their record keeping is the only thing that will keep them safe from having the benchmarks applied.

There may be other compelling reasons, such as sickness or extended breaks from work which the ATO will take into account, but the bottom line is being able to prove the income and expenses that are reported.  If not, the benchmarks will be applied.