Small business benchmarks

Overview

Small business benchmarks update Benchmarks have been updated with data from the 2010 financial year. For details of the changes and improvements refer to Cash economy frequently asked questions. Benchmarks are updated annually using the latest available income tax data. How to find your business's benchmarks Small business benchmarks are listed by both business type (A-Z) and business industry categories based on the business industry codes or Australian and New Zealand Standard Industrial Classification (ANZSIC codes). You can also find the benchmarks by using the search function and searching by either: business industry or ANZSIC code business type benchmark type. Go to Small business benchmarks.

Small business benchmarks are financial ratios developed to help you compare your performance against similar businesses in your industry. The benchmarks provide guidance on what figures we would normally expect a business in a particular industry to report.

We use benchmarks to identify businesses that may be avoiding their tax obligations by not reporting some or all of their income. To do that, we use the benchmark considered to be the most accurate predictor of business turnover for each industry - the 'key benchmark ratio'. We may also use the key benchmark to quantify income that has not been reported. We highlight this benchmark for each industry to help businesses and tax practitioners.

Benchmarks are published for businesses with different turnover ranges across more than 100 industries. The benchmarks are published as a range, to recognise the variations that occur between businesses. These ranges are representative of returns and activity statements in the industry, and they allow for variations between businesses in different regions and with different business circumstances.

For example, for some industries motor vehicle expenses may be published as a single percentage figure rather than as a range, as the variation for this benchmark in those industries is minimal.

By publishing benchmarks for small businesses we are making it clear what we expect from businesses in a particular industry. In doing so, we are making it fairer for everyone.

Businesses reporting outside the benchmarks may attract our attention. There may be reasons for this difference, such as higher costs or lower selling prices than others in the industry, but it may also be an indication that a business is not recording and paying tax on all its transactions, especially cash transactions.

If you find you are outside the benchmarks for your industry, you should check that you have correctly recorded and reported income and deductions for your business. To do this you should review your record-keeping practices to ensure they meet the legal requirements.

For more information about how to meet your legal record-keeping requirements, including what records you need to keep for your daily business transactions, refer to Record keeping for small business.

The following types of benchmarks are published for the small business sector:

• performance benchmarks - these provide financial ratios for different industries
• input benchmarks - these show an expected range of income for tradespeople based on the labour and materials they use.

Definitions

When we say:

• activity statement, we mean a form that businesses use to report and pay a number of tax obligations, including GST, pay as you go (PAYG) instalments, PAYG withholding and fringe benefits tax; labels G1 to G11 will be the most relevant to calculating the activity statement ratios
  associated parties, we mean people and entities closely associated with you, such as relatives, partners in a partnership, directors of companies or closely connected companies or trusts
• benchmark, we mean small business benchmarks, consisting of ratios specific to business industries
• business, we mean businesses with a turnover up to $15 million
• cost of sales, we mean the cost of anything produced, manufactured, acquired or purchased for either:
• manufacture
• sale or exchange in deriving the gross proceeds
• earnings of the business
• default assessment, we mean an original or amended assessment of a taxpayer's income tax or GST obligations that we issue when:
• insufficient or unreliable information has been reported on tax returns or activity statements
• a taxpayer has not lodged a tax return or activity statement
• GST-free sales, we mean goods or services not subject to GST and sold without GST in their price, reported at label G3 on your activity statement
• Key benchmark ratio, we mean the benchmark we use to identify businesses that may not be reporting some or all of their income
• labour, we mean salary and wage payments including contractor payments (amounts exclude GST); it does not include payments to associated parties - for example, labour provided by a business owner or business partner.
• non-capital purchases, we mean the purchases reported at label G11 on your activity statement - non-capital purchases include trading stock and normal running expenses such as:
• stationery and repairs
• equipment rentals
• leases
• total expenses, we mean the total expenses reported on the income tax return less payments to associated parties (amounts exclude GST)
   
• total sales, we mean the total sales reported on your activity statement, amounts include GST - this includes all:
• GST-free sales
• input taxed sales
• taxable sales
• turnover, we mean the total revenue you receive from providing goods or services each year, excluding GST.