home / skills / cleanexpo / ato / audit_risk_benchmarking

audit_risk_benchmarking skill

safe

This skill assesses audit probability by benchmarking tax payer financial ratios against ANZSIC-based ATO benchmarks, highlighting deviations without

npx playbooks add skill cleanexpo/ato --skill audit_risk_benchmarking

Review the files below or copy the command above to add this skill to your agents.

Files (1)

SKILL.md

2.0 KB

---
name: audit-risk-benchmarking
description: Compare entity financial ratios against ATO small business benchmarks to assess audit probability
---

# Audit Risk Benchmarking Skill

Compares a taxpayer's financial ratios (expense/income, labour costs, rent, motor vehicle) against ATO-published small business benchmarks for their ANZSIC industry code. Generates a risk profile without recommending behaviour change.

## When to Use

- Assessing ATO audit probability before lodgement
- Identifying expense ratios that deviate from industry norms
- Preparing documentation for items outside benchmark ranges
- Pre-engagement risk assessment for new clients
- Annual compliance health check

## Key Principle

**ATO benchmarks are DESCRIPTIVE, not NORMATIVE.** Being outside a benchmark is NOT illegal. This skill assesses probability, never recommends adjusting legitimate figures to match benchmarks.

## Benchmark Ratios

| Ratio | Calculation | Source |
|-------|-------------|--------|
| Cost of sales | Cost of sales / Total income | ATO Small Business Benchmarks |
| Total expenses | Total expenses / Total income | ATO Small Business Benchmarks |
| Labour costs | Wages + super / Total income | ATO Small Business Benchmarks |
| Rent | Rent expense / Total income | ATO Small Business Benchmarks |
| Motor vehicle | Motor vehicle / Total income | ATO Small Business Benchmarks |

## Engine Reference

- **Engine**: `lib/analysis/audit-risk-engine.ts`
- **Function**: `assessAuditRisk(tenantId, financialYear, options)`
- **Output type**: `AuditRiskAssessment` — includes risk factors, benchmark comparisons, and recommendations
- **Database**: `audit_risk_benchmarks` table stores cached benchmark data per industry code and FY

## Data Sources

- ATO Small Business Benchmarks: `ato.gov.au/Business/Small-business-benchmarks`
- ATO Compliance Focus Areas: Published annually
- Industry codes: ANZSIC 2006 classification

## Legislation

- TAA 1953, s 263-264 — ATO access and information powers
- TAA 1953, s 8C — Record keeping obligations

Overview

This skill compares a taxpayer's key financial ratios to ATO small business benchmarks for the taxpayer's ANZSIC industry code and generates an audit probability profile. It highlights which ratios fall inside or outside benchmark ranges and summarizes associated audit risk factors. The skill is descriptive: it assesses likelihood of ATO attention and does not advise altering legitimate records or figures.

How this skill works

The analysis engine ingests reported financials and identifies industry classification and financial year, then calculates benchmark ratios (cost of sales, total expenses, labour costs, rent, and motor vehicle). Each ratio is compared to cached ATO benchmark ranges for the industry and year, and the skill scores and ranks risk factors based on the degree and persistence of deviation. The output is a structured AuditRiskAssessment that lists benchmark comparisons, risk drivers, and documentation points to prepare for potential review.

When to use it

Before lodgement to assess relative audit probability
When preparing supporting documentation for items outside benchmarks
During pre-engagement checks for new clients to flag higher-risk profiles
For annual compliance health checks and internal risk reporting
To prioritize deeper reviews where benchmark deviations are persistent or large

Best practices

Treat benchmark results as probability indicators, not proof of wrongdoing
Include supporting records and explanations for any outlying ratios
Review multi-year trends rather than a single year’s snapshot
Confirm correct ANZSIC industry code and use the matching financial year benchmarks
Use findings to guide documentation and further substantive testing, not to alter reported figures

Example use cases

A small business accountant assesses a client’s expense ratios before lodging tax returns to gauge ATO attention risk
Internal compliance team screens a book of clients to prioritize file reviews where rent or labour ratios deviate from norms
A tax advisor prepares a pack of explanations and source documents for a client with elevated motor vehicle deductions
A practice performs an annual health check across clients to identify sectors with common benchmarking anomalies

FAQ

Does being outside a benchmark mean the client will be audited?

No. Benchmarks indicate relative probability of ATO attention; being outside a range increases likelihood but is not determinative or illegal by itself.

Can this skill suggest changes to tax positions to meet benchmarks?

No. The skill only assesses risk and recommends documentation and areas for further review; it does not recommend changing legitimate figures.

What data sources underpin the benchmarks?

Benchmarks come from ATO Small Business Benchmarks and associated compliance focus areas, matched to ANZSIC industry codes and financial years.