ATO cracks down on small business tax compliance

Switching to Monthly GST Reporting – targeted approach

One significant change is the ATO’s decision to move around 3,500 small businesses from quarterly to monthly GST reporting.

Starting 1 April 2025, this change will impact businesses with a history of late lodgement, non-payment, or incorrect GST reporting. Small businesses, especially those with irregular cash flow or seasonal work, should take this transition seriously.

What members should do:

• Review your GST reporting: If you’ve had issues with late submissions or inaccurate reporting, be prepared for the potential to move to monthly reporting.
• Get your records in order: Accurate record-keeping will be more important. Ensure your financial systems and software are up to date, and consider consulting a tax professional if needed.

ATO’s data matching and compliance crackdown

Notably, the ATO is also ramping up its efforts to catch businesses that underreport income, particularly through cash transactions. While cash payments can sometimes be difficult to track, the ATO will be using advanced data matching techniques to identify discrepancies. It is therefore important that businesses are fully transparent in their reporting.

As part of its 'Getting it Right' campaign, the ATO is specifically focusing on:

• Contractors in the building and construction industry (along with other sectors like cleaning, IT, and road freight) who may be omitting income from their reports.
• Compliance with new small business boost measures, including the small business skills and training boost and the small business technology investment boost.

The ATO is also focusing on issues like incorrectly mixing business and personal income, misuse of capital gains tax concessions, and improper GST claims. This will mean that there will be little room for error when it comes to reporting your income and expenses.

What members should do:

• Ensure all income is reported: Whether it's cash or cheque payments, make sure every cent of your business income is accurately reported.
• Separate business and personal finances: Keep your business and personal accounts separate to avoid any confusion when it comes to income and deductions.
• Double-check GST claims: If you’ve made any errors in your GST reporting, it’s better to self-amend now than face penalties later.

Self-amendment and voluntary disclosure: A change to get ahead

For businesses who may have made past mistakes in their reporting, the ATO is encouraging voluntary disclosure and self-amendment of any errors or omissions. This can help avoid more severe penalties and shows the ATO that you are proactively working to get your tax affairs in order.

What members should do:

• Amend any past errors: If you’re aware of any misreporting in past BAS or tax returns, now is the time to correct it. Voluntary disclosure can prevent more serious consequences later.
• Seek professional advice: If you’re unsure whether your business is complying with all the relevant tax laws, consider speaking to a tax adviser or accountant who can help guide you through the process.

Preparing for tax time: Take control of your financials

As the ATO increases its scrutiny of small businesses, it’s more important than ever to stay on top of tax obligations. Ensuring that your GST reports are accurate and up-to-date, keeping clear financial records, and seeking professional help when needed can go a long way in avoiding any unwanted issues at tax time.

HIA members should take this opportunity to review their tax processes and ensure that their business practices are in line with ATO expectations. By building good habits now, you can set your business up for smooth, hassle-free tax seasons in the future.

To find out more, contact HIA's Contracts and Compliance team

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