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:
- to inform the business operator they are trading outside the benchmarks
- invite these operators to review their activities and record keeping to ensure all income is declared on BAS statements and income tax returns
- 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
comments
2 Responses to "Tax Office "Benchmarks" and Business Operators"My partner is a sole trader and has received one of these letters. Apparently our COGS is outside the benchmark for our industry (75 vs 71%).
The only problem is we operate within a very specific niche of the industry they have benchmarked the business against - and for this niche COGS anywhere between 70-80% is more accurate.
Our records are accurate, we do not participate in the cash economy, and we can provide evidence proving this (purchase invoices, sales receipts, price lists etc) - not sure what we should do next, write explaining why we don't fit so neatly inside their benchmarks??
This year our COGS comes in at 74%, goods only, after removing all freight charges which should be included!
Hi JC
Thanks for your comments. The ATO has now sent many letters to business operators. Many of those business operators are feeling a little intimidated to say the lease. However, many, like yourselves, maintain effective records and operate ethically. In these cases there is absolutely no reason to be concerned.
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