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Benchmarks indicate 'industry averages' only, warns TIA

Publication date: 08 Jan 98 | Source: THE TAX INSTITUTE

The TIA welcomes the release by the ATO of industry benchmarks in response to a recommendation from the Cash Economy Task Force. However, it warns that these benchmarks are 'industry averages' only and variance from them should not result in a presumption of guilt.

Taxation Institute of Australia Tax Technical Director, Ms Anna Carey said that any initiative which makes the ATO's administration of the taxation system more open, equitable, and which assists taxpayers and tax agents in understanding how the ATO operates must be supported by the community at large.

"There is much more at stake here than using these benchmarks to stem the drain on the revenue caused by the cash economy," Ms Carey said.

"On a practical level, these benchmarks are a useful business management tool, enabling businesses to measure the performance of their business against an industry average."

"Taxpayers and tax agents can also use these benchmarks as an aid in identifying whether and if there are any potential tax compliance difficulties, particularly where the performance of a business varies significantly from these benchmarks," she said.

However, the TIA is concerned that the ATO should not lose sight of the fact that these benchmarks are industry averages only.

"Variance from the industry average should not result in a presumption of guilt," Ms Carey said.

"The ATO must not presume that a business is in breach of the taxation laws simply because the performance of a business varies from these industry norms."

"If the ATO is to utilise these benchmarks to target businesses for a tax audit, the benchmarks can only ever be indicative of whether or not a business is operating above or below average industry standards."

"Variance from a benchmark itself can never be the sole basis for the ATO auditing a business."

"There must be mechanisms put in place to ensure that a business is given ample opportunity to explain, without penalty or presumption of guilt, why its performance may vary significantly from these benchmarks."

"These averages, developed by the ATO in conjunction with the industry associations and community groups, must be regularly updated and made available to taxpayers and tax agents," she said.