April 2013 Newsletter

In this edition:

Welcome

Market Valuations in SMSFs

Workers Compensation Part 2: Which contractors do I need to cover?

Gunning for Growth in the property market

What are ATO benchmarks?

ATO benchmarks help assess whether your business is in danger of being audited and allow the ATO to identify which businesses may be avoiding their tax obligations by not reporting some or all of their income – targeting mainly businesses that may be operating in the cash economy. This is done by comparing the information obtained from tax returns and BAS provided by the business to the key benchmark of that industry.

The ATO now also uses the benchmarks to issue default assessments and amended Activity Statements. Businesses that fall outside the benchmarks without adequate records to explain their income and expenses have had their income and their sales and GST adjusted up to the benchmarks - resulting in additional income tax and GST as well as penalties and interest.

In a recent decision, the Administrative Appeals Tribunal (AAT) issued an amended assessment to a bakery for undeclared income and incorrectly calculated GST. Taxpayer costs incurred were 58% of reported sales which were well outside of the ATO benchmark range of 32-40% range set by the Commissioner of Taxation for costs in bakeries and hot bread shops.

If a business has incorrectly claimed income and/or expense, it can apply for a voluntary disclosure. This would reduce the penalties incurred, particularly before the ATO informs you are being audited.

It is possible for a business to be outside the benchmark range as long as there are sufficient business records to back up those claims. Read more about small business record-keeping.