The Australian Taxation Office (ATO) has once again outlined its focus areas for small business compliance, giving more than 2.5 million small businesses across the country a heads-up on where enforcement activities will be ramping up.
While most small businesses are doing the right thing, the ATO is cracking down on those who are incorrectly reporting income, mismanaging GST, or wrongly claiming tax deductions. Here’s what you need to know to stay compliant and avoid penalties.
Key Focus Areas for the ATO
1. Contractor Income Reporting
One major area of concern for the ATO is contractors failing to report all their income or omitting it altogether. To combat this, the ATO is using data matching to ensure all contractor income is correctly reported. Industries in the spotlight include:
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Building and construction
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Couriers and delivery services
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Cleaning
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IT services
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Road freight
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Security, investigation, and surveillance
If you operate in any of these sectors, make sure your income records are complete and accurate to avoid scrutiny.
2. GST Reporting Crackdown
From April 1, the ATO will be shifting about 3,500 small businesses with a history of non-payment, late lodgement, or incorrect reporting from quarterly to monthly GST reporting. The goal is to help businesses improve their reporting habits and cash flow management.
If you receive a notification about this change, it’s crucial to adjust your reporting process to avoid penalties and interest charges.
3. Incorrectly Claiming Boost Deductions
The ATO is also targeting small businesses that have incorrectly claimed boost tax deductions, specifically:
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The Small Business Skills and Training Boost, which allows eligible businesses to deduct 20% more for certain training expenses.
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The Small Business Technology Investment Boost, offering a 20% bonus deduction on eligible technology purchases.
Businesses that have mistakenly claimed these deductions are being encouraged to self-amend their tax returns before the ATO steps in.
Other Compliance Areas Under the Microscope
In addition to these priority areas, the ATO is keeping a close eye on:
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Small business capital gains tax (CGT) concessions to ensure they are correctly applied.
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Mixing business and personal income, a common issue that can lead to compliance breaches.
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Non-commercial business losses, particularly in cases where businesses continue to operate at a loss.
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GST registration and income reporting for ride-sharing, taxi, and limousine services.
What This Means for Small Businesses
ATO Deputy Commissioner Will Day has emphasized that the tax office’s goal is to help small businesses “get it right” when it comes to tax and super obligations. By sharing these focus areas upfront, the ATO is encouraging businesses to develop good habits and remain compliant.
For business owners, this is a clear signal to: ✔ Review your tax and GST reporting practices. ✔ Ensure all income is correctly reported, especially if you’re a contractor. ✔ Double-check any claimed tax boosts to avoid incorrect deductions. ✔ Monitor ATO updates and be proactive about compliance.
If you have concerns about any of these areas, seeking professional advice could save you from costly audits and penalties.
Stay Ahead of ATO Scrutiny
With these increased compliance measures, it’s never been more important for small businesses to stay on top of their tax obligations. Ensuring accurate reporting and record-keeping will help you avoid unnecessary stress and potential fines.
For more information on how to remain compliant, visit the ATO’s website or contact our office.
