Tax Office "Benchmarks" and Business Operators

Some time ago (about two years) the ATO began establishing benchmarks for various trades and businesses to compare income and expenses of a taxpayer with an industry standard. The list of businesses now covered by the ATO benchmarks is quite substantial. I started providing details on these benchmarks  but admit I have lost track of them - see BUSINESS & SUBBIES in the index page  (time prermitting I will include a full list in my blog soon).

It seems the ATO is now starting to act on these benchmarks by writing to vaious trades people / business operators where they fall outside the benchmark guidelines - for example, where materials or wages is high relative to gross income and the appropriate benchmarks for the industry.

The letter has multiple purposes:
  1. to inform the business operator they are trading outside the benchmarks
  2. invite these operators to review their activities and record keeping to ensure all income is declared on BAS statements and income tax returns
  3. to provide an oprtunity for business opoerators to correct omissions made in the tax return the letter is referring to (current round of letters is referring to the 2008 year).

Accordingly, clients are contacting the ATO and their accountants, wanting to know what to do - if anything?

The letter does include a "Correction" form to be used if the business operator believes there has been an omission of income or overstatement of the relevant expense. However, if this is not the case than the business operator is not required to act on the letter.

If you have received one of these letters from the tax office please feel free to make a comment on this post (please keep is clean).

By David Maynard

Copyright 2014. My Tax Zone.