To minimise compliance costs and improve mixed businesses risk identification, the ATO should consult with tax agents and taxpayers with a view to developing and employing alternative risk models and approaches to assess the risk of underreporting by mixed businesses.
We agreed with this recommendation and implementation was completed on 19 November 2013.
For some industries, the combination of our risk engine and relevant small business benchmarks can exclude up to 90% of businesses from consideration for audit.
We worked with representatives nominated by our Tax Practitioner Forum to see if it was possible to identify a benchmark for mixed businesses. After several workshops, it was concluded that there was no viable benchmark methodology.
Mixed businesses are still assessed in our risk models, but they do not have the benefit of a benchmark which might help to exclude some of them from audit consideration at an early stage.
If we do commence an audit on mixed business and the business has complete and accurate records of its tax position then early exit options are available to reduce compliance costs for the business where applicable.