Small business is serious business — the ATO is making that very clear. And as your local small business accountant, we at Hills Accounting understand that when the ATO drops hints, we should pay attention.
In 2025, the tax office is turning up the heat on small-business compliance. If you’re running or advising a small enterprise, now is the time to sharpen your habits.
Let’s walk through what the ATO is focusing on — and, more importantly, what you should do about it.
What’s attracting the ATO’s attention?
The ATO has publicly flagged key risk areas for small businesses. These include:
- Income omitted by contractors, where data-matching is used to check for unreported earnings.
- The shift from quarterly to monthly GST/BAS reporting for businesses with weaker compliance records — all in the name of better monitoring and cash-flow discipline.
- Businesses treating income and assets as personal, or using business money for personal benefit (including hidden loans or director benefits) — especially under the company/trust structure.
- Incorrect use of deductions and concessions, especially those targeted to small business (for example CGT concessions, non-commercial business losses).
And then there is operating outside the system entirely with things like:
- undeclared income
- GST registration issues
- ride-sourcing/taxi-service income not reported
👉 Read more from the ATO here:
https://www.ato.gov.au/businesses-and-organisations/small-business-newsroom/our-new-focus-areas-for-small-business
Why it matters
Being in the ATO’s spotlight isn’t just about awkward letters and phone calls. It can mean:
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Audits
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Penalties and interest
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Forced monthly reporting instead of quarterly
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Extra scrutiny on future lodgements
The ATO calls these steps a way to “help small businesses get it right” — but for many, it’s an unwelcome surprise.
What you can do now
There are a few good ‘habits’ you can adopt that will help to keep you off their radar.
- Separate business vs personal — If you’re a company, trust or partnership, ensure business bank accounts, assets and transactions are clearly recorded. Avoid using the business for personal expenses without proper documentation and tax treatment.
- Review deductions and concessions carefully — If you’re claiming CGT small business concessions, non-commercial losses or extra write-offs, check eligibility. Mis-claiming is a common trigger for review.
- Check your BAS/GST reporting cycle — If you have a history of late or incorrect lodgements or payments, the ATO may force your move to monthly reporting. Even if you’re still on quarterly, it’s smart to treat it as if you’re on monthly (i.e., keep records monthly anyway).
- Contractor income and data-matching — If you engage contractors (or you are a contractor), make sure all payments are reported and income declared. The ATO increasingly uses reported data to identify mismatches.
- Record-keeping and software — Use reliable bookkeeping software, update records regularly, and keep supporting documents for at least five years. If you haven’t yet, now is the time to automate or digitise.
- Be proactive with errors — If you realise you’ve made a mistake (e.g., unclaimed income, incorrect deduction), consider self-amending early. That’s much better than waiting for the ATO to reach out.
Summing up
The ATO’s message to small business owners is clear: “We want you to get it right — and we’re watching the habits that suggest you’re not.”
By cultivating strong financial-reporting habits now, you reduce risk, build credibility (with your advisers and lenders) and keep your energy focused on business growth rather than compliance headaches.
If you’d like to talk to us about making sure your systems are up to date, or get help reviewing your end-of-year readiness, the team at Hills Accounting is ready to help.
Remember, this article is general in nature and doesn’t take into account your specific objectives, financial situation, or needs. For advice tailored to your circumstances, have a chat with us at Hills Accounting Hobart.
Talk to Kathy and the team today and stay ahead with Hills Insights.
Call Now! 03 6273 7800, or email admin@hillsaccounting.com.au.