The Australian Taxation Office (ATO) has announced an increased focus on small businesses with annual turnovers between $1 million and $10 million, particularly in industries where recurring errors are being detected. These include:
- Property and construction – builders, contractors, and tradies.
- Professional, scientific and technical services – engineering, design, IT, and consulting professionals.
What Issues Is the ATO Seeing?
The ATO continues to identify common mistakes that can lead to compliance breaches and penalties, including:
- Omitted income in BAS and tax returns, including income from related entities.
- Overclaimed expenses and GST credits, often due to poor record-keeping.
- Private expenses incorrectly claimed as business-related, or not properly apportioned between business and personal use.
- Failure to register for GST when required.
- Incorrect claims for the R&D tax incentive, particularly for activities that do not meet eligibility criteria.
- Not seeking independent advice from a registered tax agent, especially in head contractor/subcontractor arrangements.
Why Is This Important?
The ATO’s focus is not just about enforcement—it’s about helping businesses get it right from the start. Errors can lead to costly penalties, audits, and reputational damage. By understanding these common pitfalls, businesses can take proactive steps to ensure compliance.
How to Stay Compliant
- Review your income reporting processes to ensure all sales and related entity income are captured.
- Double-check expense claims and GST credits for accuracy.
- Separate private and business expenses clearly and apportion shared costs correctly.
- Confirm your GST registration status and obligations.
- Seek professional advice before claiming R&D tax incentives.
- Engage a registered tax agent for complex arrangements or industry-specific compliance requirements.
Need Help?
If you’re unsure about your obligations or want to review your current processes, get in touch with our team. Getting it right now can save you time, money, and stress later.
