ATO Warns Small Businesses About GST Compliance
As tax time approaches, the Australian Taxation Office (ATO) is turning its focus toward small businesses, issuing warnings about potential pitfalls, particularly concerning Goods and Services Tax (GST) compliance. There are approximately 2.6 million small business owners in Australia who will soon receive communications from the ATO regarding their tax and superannuation responsibilities as part of the ATO’s ‘Ready for Business’ initiative.
This campaign aims to provide additional support to new business owners, helping them to navigate their obligations correctly from the outset. Despite the goodwill of many small business owners, the ATO has noted that some entities are intentionally failing to meet compliance standards.
One of the ATO’s main areas of concern is the collection of GST, with estimates suggesting that around $8 billion annually is lost due to non-compliance. Not every small business is required to register for GST; businesses with a turnover of $75,000 or more, or those offering taxi, limousine, or ride-sourcing services, must register, collect GST, and remit it to the ATO.
ATO Deputy Commissioner Will Day advises small businesses to allocate funds for GST, along with pay-as-you-go (PAYG) withholding and superannuation if they have employees. He stressed the importance of not dipping into these funds for cash flow management. "Set up separate bank accounts for these obligations so you’re prepared when it’s time to pay," Day recommended.
In early 2025, the ATO notified ride-sourcing operators and taxi drivers about increased scrutiny on those who may be operating outside the GST system, resulting in over 3,000 new registrations. "Those who deliberately avoid compliance will face consequences," warned Day. Additionally, approximately 3,500 small businesses with a history of late payments or incorrect reporting have been shifted from quarterly to monthly GST reporting.
Furthermore, the ATO is now keeping a close eye on over 70,000 individuals who supplement their income with side hustles, which include gig and sharing economy activities. Rising living costs have compelled many Australians to embrace side jobs, with the Australian Bureau of Statistics indicating there were one million multiple job holders as of December.
It is important for those whose side activities turn into profitable enterprises to understand their tax, superannuation, and registration obligations. Day highlighted that "a business generally involves continuous and repeated activities aimed at making a profit."
To assist with navigating these obligations, the ATO provides resources to help individuals determine whether their side hustle qualifies as a business.
New small business owners are also encouraged to prepare ahead to mitigate the likelihood of a hefty tax bill when it comes time to lodge their first tax return. They are allowed to voluntarily enter and prepay their estimated tax liabilities through PAYG instalments upon commencing their business operations.
For updates and further information, small business owners can follow the ATO on Facebook, LinkedIn, and Instagram.
In conclusion, as the ATO ramp up their efforts to ensure compliance among small businesses, particularly regarding GST, it is essential for business owners to stay informed and diligent about their obligations to avoid potential penalties.
