The Australian Taxation Office (ATO) has announced a new compliance initiative focusing on contractor income reporting, GST compliance, and tax deduction claims among small businesses. With more than 2.5 million small businesses operating across Australia, the ATO aims to ensure tax obligations are met while addressing errors and deliberate non-compliance.
Key compliance focus areas
The ATO regularly updates its compliance priorities, providing small businesses with guidance on common areas of concern. For the current period, the agency is focusing on:
- Contractors omitting or misreporting income
- Incorrect GST reporting
- Misuse of small business tax deduction “boost” measures
Deputy Commissioner Will Day emphasized that the goal is to support small businesses in meeting their tax and superannuation obligations, while addressing cases of opportunistic or deliberate non-compliance.
How the ATO is enforcing compliance
To strengthen compliance efforts, the ATO is implementing data-matching technology across various contractor industries, including building and construction, couriers, cleaning, IT, road freight, and security services. This technology will cross-check income reports against external data sources to identify inconsistencies.
Additionally, from April 1, the ATO will require 3,500 small businesses—those with a history of non-payment, late lodgement, or incorrect reporting—to switch from quarterly to monthly GST reporting. The agency believes this measure will encourage better business habits and improve cash flow management.
For businesses that have incorrectly claimed tax deductions, the ATO is encouraging self-amendment to rectify errors. This applies to deductions under initiatives such as the small business skills and training boost and the small business technology investment boost, which allow for a 20% tax deduction on eligible expenses.
Additional compliance priorities
Beyond these key areas, the ATO is also continuing to monitor broader tax compliance concerns. This includes small business capital gains tax concessions, mixing business and personal income, non-commercial business losses, and GST registration and income reporting for ride-sharing, taxis, and limousines.
Small businesses can find more information about the ATO’s focus areas here.
