The ATO is not shy about where it plans to look. Its small business focus areas are public, and with a $27.2 billion small business income tax gap, as the ATO has put it, you can expect the same themes to keep coming up. The good news is that every one of them is something you can check yourself in an afternoon.

What the ATO says it is watching

The ATO's focus areas for businesses with aggregated turnover under $10 million fall into four groups:

  • Business versus personal. Business money and assets being used for private purposes.
  • Deductions and concessions. Non-commercial losses and the small business CGT concessions are named examples.
  • Operating outside the system. Undeclared contractor income and incorrect GST registration, plus paying staff cash to avoid tax and super.
  • Building good habits. Accurate record keeping, and moving to monthly GST reporting where required.

The ATO has also flagged underreporting cash payments, overstating deductions and leaving income out of returns as ongoing concerns. Where it sees deliberate non-compliance, it has said enforcement can escalate to steps such as director penalty notices and credit bureau reporting.

Why this matters now

The September quarter BAS is due soon, and payday super is now in place. Both put your records and your cash flow under a brighter light. If your books are tidy, those deadlines are routine. If they are not, they are where problems show up.

A quick self check

  • Look at your last three months of bank statements. Can you point to a business reason for every transaction? Anything personal should be repaid or recorded properly, not left sitting in the books.
  • Match your income. Cash, card, invoices and online platforms should all end up in your records. If a payment is not recorded, it is a risk.
  • Check your contractors. Do you have an ABN and an invoice for each one, and are any of them really employees?
  • Review your GST registration. Make sure you are registered if you need to be, and reporting at the right frequency.
  • Set aside GST and PAYG. The ATO suggests putting these amounts aside rather than using them for daily costs.
  • Use the free tools. The ATO offers online courses, a record keeping evaluation tool and cash flow coaching resources.

What to do if you find a gap

If you spot something wrong, fix it now and tell your accountant. Voluntarily correcting a mistake before the ATO contacts you is generally a much better position than waiting to be asked. If a tax debt is part of the picture, contact the ATO early about a payment plan.

The focus areas are not a secret list, they are a checklist. Run through it before someone else does.

This article is general information only and does not take your circumstances into account.