28 Nov 1111 IGOT announces terms of reference for review of ATO’s use of benchmarking
In a media release issued 28 November 2011, the Inspector-General of Taxation, Ali Noroozi, announced terms of reference for his review into the ATO’s use of benchmarks to target the cash economy and called for stakeholder submissions.
The ATO has published benchmarks for over 100 industries covering small businesses with a turnover under $15 million. The ATO indicates that these key financial ratios provide guidance on the income it expects businesses in a particular industry to report. Taxpayers falling below the benchmarks may be contacted by the ATO and be required to explain the shortfall.
Mr Noroozi explained, “Taxpayers and tax agents have expressed frustration at what they see as an inference by the ATO that their business is just not making enough money”.
Mr Noroozi also said, “It has been suggested that the overall ATO approach in this area can be 'heavy handed' with too much faith being placed in benchmarks. My review will also consider whether record keeping requirements expected of such small businesses are too onerous and whether it is fair to use benchmarks as the basis for default assessments”.
Submissions on the review are due by 3 February 2012.