ATO issues business benchmarks to support ECEC services

The Australian Taxation Office (ATO) has released updated benchmark data to support small businesses, including early childhood education and care (ECEC) services, to compare their financial performance with that of their competitors, and “swim between the flags”.

Assistant Commissioner Peter Holt said that businesses should use the benchmarks to gauge the strength of their business and keep an eye on their competition. “We want small businesses to stay afloat, so our benchmarks are a great way to ensure your business is viable, competitive and not at risk of venturing into rough water,” he said.   

The benchmarks are also a tool the ATO can use to identify small businesses who may not be reporting some or all of their income.

Mr Holt said businesses should think of the benchmarks as metaphorical flags, saying “like the red and yellow flags on the beach. If you stay between the flags, you’ll be less likely to attract our attention”.

Updated benchmark data for ECEC services is amongst the 100 industries and sectors which have been updated recently including:

• Accommodation and food

• Building and construction trade services

• Health care and personal services

• Manufacturing

• Automotive electrical services

• Machinery and equipment repair and maintenance

• Architectural services

• Veterinary services

• Retail trade

• Transport, postal and warehousing.

Mr Holt said the most efficient way to compare one business’ performance with that of another was to use the business performance check tool in the ATO app, which automated calculations. The ATO app is available to download for free from the Google Play or Apple app stores.

“If your costs are within the benchmark range, you should be satisfied that you’re keeping up with your competition,” Mr Holt said.

“If you use a registered tax professional, it’s also a good idea to have a chat with them about where your business sits in comparison with our benchmarks. They might have some advice about steps you can take to improve your performance. We also encourage tax professionals to use the benchmarks to initiate conversations with their small business clients.”

The benchmarks account for the variance in operational costs across both business type and location, using data drawn from over 1.5 million small businesses around the country.

Mr Holt warned that businesses operating outside the benchmarks may trigger a ‘red flag’ for further attention from the ATO, adding “a frequent red flag is a business reporting minimal profit while the business owner seems to be maintaining a lifestyle far exceeding their personal income”.

The ATO has received significant funding to tackle the ‘black economy’ and is increasing enforcement activity. The benchmarks are one of the tools the ATO is using to crack down on the black economy along with data matching and referrals from the community, Mr Holt said.

“It’s all about protecting honest businesses from competitors who are trying to get ahead by avoiding their tax obligations”.

A hotline (1800 060 062) has been established by the ATO, to allow small business operators to report competitors who may be engaging in dishonest conduct, with reports also able to be made at ato.gov.au.

The benchmarks are available via the ATO app, or through the ATO website.