Small business owners have a new tool to assess their finances. On March 16, the Australian Taxation Office (ATO) released revised benchmarks, which will be applicable to 100 industries and more than 2 million SMEs operating in Australia.
Consider this as an annual health check-a simple method of comparing your business with others, identifying potential issues, and avoiding tax issues. For SMEs, it’s not so much paperwork but an opportunity to be vigilant within a competitive landscape.
These are updated annually by the ATO based on tax return data to highlight average costs, revenue, and principal ratios like cost of sales to turnover. Assistant Commissioner Tony Goding calls them “a useful tool for small businesses to stay in good financial trim.” He makes the analogy a trip to the GP: “They diagnose strengths or pick up early warning signs.” If you run a cafe, a trading business, or a pet store, the benchmarks inform you where you are—or where you should be doing better.
Take the example of Anna, a one-person business proprietor of a pizza shop. She plugged her figures into the ATO’s Business Performance Check tool and found that her cost of sales to turnover was 44 percent, which was in line with her industry. But it caused her to think: some of her rivals were leaner. So, Anna negotiated new suppliers, cut back on costs, and increased her profit margin. It’s an easy move, but one a lot of SMEs forget about without this sort of data.
Why is this important? For starters, it helps businesses stay competitive. SMEs employ 68 percent of Australia’s workforce, according to the Australian Bureau of Statistics, but their margins are often thin, leaving little room for error. The benchmarks can highlight if your expenses—like stock or wages—are higher than the industry average, signaling areas to trim. Goding goes on: “If your numbers are outside the benchmark range, it may be time to go back to the drawing board with your business plan.” For example, a florist who is investing 50 percent in inventory when others are investing 40 percent might need to adjust prices or suppliers.
There is also a tax consideration. Businesses that stay within industry norms are “usually less likely to be in the ATO’s crosshairs,” Goding says. But if you wander too far—either by under-stating income or over-stating deductions—you could trigger red flags. The ATO does not just use benchmarks but outliers tend to trigger follow-up. Willful tax evaders are a cause for concern, driving a $11.2 billion small business tax gap each year, with $8.9 billion associated with shadow economy activity. For compliant SMEs, this is a good thing: less competition undercutting them by evading tax. “It’s about leveling the playing field,” Goding insists.
The shadow economy is a huge problem, and nearly 60 percent of the tax gap results from deliberate avoidance—like cash-in-hand labour or fiddled books. The ATO shuts down these operations through benchmarks supplemented by tips and data matching. For compliant SMEs, it’s a winner: it shuts down unfair competition. But it’s also a warning—while if you unintentionally drift beyond the line, you could attract attention. A tradie not reporting a $5,000 job, for example, could raise a query.
The benchmarks are applied to 100 industries, including cafes and building, retail, and health services. They can be accessed online at the ATO website, the app’s check facility, or download data from data.gov.au. They’re not numbers—they give you a picture of where your business stands. A mechanic can look at his labor rates being higher than others and make an adjustment to staffing. A gym owner can look at her rent being too high and negotiate the lease.
The ATO method is backed by independent professionals and by world standards, so the information is sound.
SMEs do not have to figure it all out for themselves. The ATO’s free online resource, Essentials to Strengthen Your Small Business, offers the building blocks of tax and superannuation—such as GST and payroll obligations—so you can better discuss it with advisors. If you need extra help, a tax agent or business coach will drill further into your benchmarks. The ATO also provides resources such as the Business Viability Assessment and personal living expense worksheets, which can assist in determining whether your business is financially viable.
An important note for SMEs: remember the Treasury’s new payday super rules, revealed last week. From July 2026, super contributions will be linked to paydays. If you’re overdue on a $1,000 payment, you’ll pay a penalty of $600 (60 percent of the delay), as well as interest. Benchmarks can help you gauge whether your cash flow will be able to withstand such fluctuations. The ATO app even lets you test out different scenarios—simply key in your turnover and check where you stand.
What to do? First, pull out your numbers—your sales, costs and profit—and have a glance at the ATO website or app to compare your ratios. If they’re wrong, dig deeper. Perhaps, for example, a cafe with high food costs can obtain new suppliers, as Anna did. Second, tidy up your books. Cluttered bookkeeping can skew your benchmarks and land you on the ATO’s radar—accounting software like Xero can put you back on track. Third, get ready for the 2026 super changes; a cash buffer is better than a fine. Fourth, use free ATO tools or consult a professional if you need help. Submissions on the super rules close on April 11—your input could help ease the burden.
This isn’t about punishing SMEs—it’s about giving them the tools to thrive. Cash flow is the number one worry for 43 percent of small firms, says ABS research released in 2023, and benchmarks offer a warning before it becomes catastrophic. Goding says it this way: “Whether you’re running a pizza shop, pet store, or plumbing business, the benchmarks let you compare how your business is doing.” With a day of $11.2 billion tax deficits and $600 fines, that information is not just helpful—it’s essential.The ATO’s online learning platform Essentials to strengthen your small businessExternal Link can support small business owners to prepare for these conversations, as well as further understand their tax and super obligations.
The benchmarks are accessible on the ATO website and via the ATO app business performance check tool.
The key benchmark ratios can also be downloaded from data.gov.au.
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