The ATO is looking to continue their fight against the cash economy by visiting various businesses in capital cities that are operating as a “cash only” business. The current businesses under scrutiny are cafes and restaurants and hair and beauty services. Cash Business
The ATO have stated that businesses who use “cash only” services are at a higher risk of not correctly reporting sales. It is estimated that more than half of businesses in the hair and beauty industry are cash only and about 45% for restaurants and cafes.
It is reported that the ATO will be sending officers to visit these types of businesses directly, where they would be obtaining information as part of their field work. It is unknown whether an official visit would be after an undercover visit.
Risk mitigation steps
The primary risk mitigation steps would be to ensure that your clients in these industries are within the acceptable ATO small business benchmarks. We have already published an event relating the small business benchmarks in the café (or coffee shop) industry here.
The other benchmarks are listed below for your reference. Clients outside the benchmarks should be notified immediately.
| Key benchmark ratio | Annual turnover range | ||
| $65,000 – $500,000 | $500,000 – $2,000,000 | More than $2,000,000 | |
| Income tax return | |||
| Cost of sales/turnover | 31% – 37% | 32% – 37% | 30% – 36% |
| Average cost of sales | 34% | 35% | 33% |
| Total expenses/turnover | 80% – 89% | 86% – 93% | 86% – 94% |
| Average total expenses | 85% | 90% | 92% |
| Labour/turnover | 17% – 26% | 23% – 31% | 27% – 32% |
| Rent/turnover | 13% – 20% | 9% – 14% | 7% – 10% |
| Activity statement | |||
| Non-capital purchases/total sales | 56% – 68% | 52% – 62% | 50% – 59% |
Beauty services
| Key benchmark ratio | Annual turnover range | ||
| $65,000 – $200,000 | $200,000 – $400,000 | More than $400,000 | |
| Income tax return | |||
| Cost of sales/turnover | 15% – 23% | 15% – 21% | 16% – 23% |
| Average cost of sales | 19% | 18% | 19% |
| Total expenses/turnover | 64% – 77% | 76% – 86% | 80% – 89% |
| Average total expenses | 71% | 81% | 85% |
| Labour/turnover | 22% – 33% | 26% – 35% | 28% – 37% |
| Rent/turnover | 14% – 23% | 12% – 19% | 9% – 16% |
| Activity statement | |||
| Non-capital purchases/total sales | 46% – 58% | 43% – 54% | 43% – 52% |
Hairdressers
| Key benchmark ratio | Annual turnover range | ||
| $65,000 – $150,000 | $150,000 – $300,000 | More than $300,000 | |
| Income tax return | |||
| Cost of sales/turnover | 12% – 17% | 12% – 17% | 12% – 17% |
| Average cost of sales | 14% | 15% | 15% |
| Total expenses/turnover | 54% – 71% | 72% – 84% | 79% – 89% |
| Average total expenses | 62% | 78% | 84% |
| Labour/turnover | 26% – 37% | 30% – 41% | 34% – 44% |
| Rent/turnover | 15% – 22% | 11% – 16% | 9% – 15% |
| Activity statement | |||
| Non-capital purchases/total sales | 40% – 52% | 37% – 47% | 36% – 46% |
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