Taxation Office Small Business Benchmarks for Trades

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What are small business benchmarks?

Small business benchmarks are tools used to compare the financial performance of a business against other businesses in the same industry. The benchmarks are published by The Australian Taxation Office and have been calculated based on data reported on income tax returns and business activity statements. In the majority of cases the benchmarks are expressed as a percentage of a business' annual turnover.

How can these benchmarks benefit your business?

Business benchmarks are a useful tool for all businesses. The benchmarks can be used to

  • check if your business is at risk of a taxation office audit;
  • compare how your business is performing with others in the same industry;
  • assess whether your record keeping needs to be improved.

Case Study

James is a sole trader carpenter. A review of his annual taxation return shows the following.

 Gross Income            $ 145,650 
 Materials  $ 87,500
 Ute Expenses  $ 12,300
 Other Expenses  $ 25,800
 Profit  $ 20,050

 

If we compare James's results to the ATO benchmarks for carpenters we come up with the following percentages. You can find the ATO percentages here.

   James       ATO
 Cost of Sales/Turnover          60%  20% - 36%
 Ute Expenses/Turnover  8.4%  4% - 7%

 

Compared to carpenters across Australia who have an annual turnover of between $110,000 - $400,000, James is reporting outside the ATO benchmarks for materials and motor vehicle expenses. From an ATO point of view there is something unusual about James's figures and this may prompt the ATO to contact the business or James's suppliers to obtain further information.

What should businesses do?

Prior to lodging the annual income tax return compare your business to the ATO benchmarks for your industry. If your business is operating outside these benchmarks, take action as soon as possible.

Need more information?

Feel free to contact our office to discuss your business with us.

Alternatively, refer to the ATO website

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