The ATO tests compliance through the use of data matching and small business benchmarking.
Data from banks, government agencies, industry suppliers and other sources comes together to help identify who might not be paying their fair share of tax. This data helps identify businesses that might not be putting through all of their cash sales or are not reporting all of their income.
The ATO compiles small business benchmarks, or financial ratios, from information provided on activity statements and tax returns. These benchmarks are used to help identify businesses that might be avoiding some of their tax obligations by not declaring some of their income.