Understanding the ATO's New Small Business Benchmarks and How Trinity Accounting Practice Can Help You Thrive

Introduction

The Australian Taxation Office (ATO) has released updated small business benchmarks for over 100 industries. These benchmarks are a powerful tool designed to help businesses like yours measure financial performance and stay compliant. Whether you're in retail, construction, hospitality, or healthcare, understanding these benchmarks is essential to running a healthy and sustainable business.

At Trinity Accounting Practice, we help small businesses interpret and implement benchmark data to improve performance, identify inefficiencies, and ensure compliance with the ATO's requirements. In this blog, we’ll explore what the benchmarks are, how they work, and why they matter—plus how we can support you every step of the way.

What Are Small Business Benchmarks?

Small business benchmarks are financial ratios developed by the ATO based on data from over 2 million Australian small businesses. These ratios include cost of sales to turnover, rent to turnover, wages to turnover, and other expense ratios. They are segmented by industry and turnover size so businesses can make relevant comparisons.

For example, if you're a cafe owner, the ATO provides an expected range for cost of goods sold as a percentage of your revenue. If you’re outside this range, it may raise a red flag with the ATO—or it could simply mean your business needs to review pricing or supplier agreements.

Why the ATO Created Benchmarks

The ATO’s main goal is to ensure tax compliance across the board. Benchmarks help them identify businesses that may be under-reporting income or operating outside industry norms. These tools also help business owners self-assess and make informed decisions.

According to the ATO, nearly $11.2 billion in lost tax revenue annually is due to non-compliance in the small business sector. The benchmarks act as a “health check” for your business and help you avoid unintended compliance issues.

Industries Covered by the Benchmarks

Benchmarks are available for a wide range of sectors including:

• Accommodation and Food Services
• Construction and Trades
• Retail
• Health and Personal Care
• Automotive Services
• Transport and Logistics
• Beauty and Hairdressing
• Professional and Technical Services

Each category includes data broken down by business size and turnover brackets, allowing for specific and accurate comparisons.

Key Financial Ratios to Monitor

1. Cost of Sales to Turnover
   • Helps you assess your gross profit margins.
2. Labour to Turnover
   • Indicates how much revenue is spent on wages.
3. Rent to Turnover
   • Evaluates your lease expenses in proportion to income.
4. Motor Vehicle Expenses to Turnover
   • Important for delivery or mobile service businesses.
5. Total Expenses to Turnover
   • Gives a broad view of how efficiently you run your business.

These ratios help identify areas where you're overspending or underperforming compared to your industry peers.

ATO App: Business Performance Check Tool

The ATO offers a free tool within its app that allows businesses to run a “Business Performance Check.” This tool lets you:

• Input basic financial figures
• Automatically compare your results to the ATO benchmarks
• Understand where your business sits within the industry spectrum
• Make informed decisions quickly

At Trinity Accounting Practice, we guide you through using this tool or perform the analysis for you with deeper insights.

What Happens if You Fall Outside the Benchmark Range?

If your business sits outside the benchmark range, it doesn’t automatically mean you’re in trouble—but it may prompt a review. The ATO may reach out with a request for clarification or further documentation.

Common reasons for falling outside the benchmark include:

• Business location differences
• Seasonality
• Unique customer base
• Changes in suppliers or cost structures

This is where our experience comes in. Trinity Accounting Practice will help you document and justify any variations so you remain compliant and stress-free.

Case Study: A Cafe Owner in Beverly Hills NSW

A local cafe owner came to Trinity Accounting after receiving an ATO letter stating their reported cost of sales was outside the benchmark. We conducted a full financial review and discovered that an increase in supplier prices had not been passed on to customers, affecting their profit margin.

We worked with the client to:

• Adjust pricing without losing customers
• Source alternative suppliers
• Implement cost tracking in Xero

Within six months, the business returned to within benchmark levels and saw a 12% improvement in net profit.

How Trinity Accounting Practice Helps Small Businesses

✅ Identify and explain benchmark deviations
✅ Use software like Xero to align your business with industry standards
✅ Implement strategies to reduce overheads
✅ Help prepare financials that reflect true business activity
✅ Support you during ATO reviews or audits

Our hands-on support gives you peace of mind and allows you to focus on growing your business.

Don’t Leave It Too Late – Benchmark Today!

Whether you're starting out or have been running your business for years, reviewing your performance against the latest ATO benchmarks is vital. Doing so can help you:

• Maximise profit
• Stay compliant
• Prepare for funding or expansion
• Avoid audits or penalties

Contact Trinity Accounting Practice

👉 Trinity Accounting Practice
✅ Accounting Firm in Beverly Hills
☎️ 02 9543 6804
📍 159 Stoney Creek Road Beverly Hills NSW 2209
🌐 www.trinitygroup.com.au
📅 Weekend & after-hours appointments available!
📅 Booking Link: https://calendly.com/ramy-hanna

Let us help you understand your numbers and unlock your business's full potential today!

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