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ATO Warns Small Businesses About GST Compliance
As Australia approaches tax time, the Australian Taxation Office (ATO) is intensifying its focus on small businesses, particularly regarding Goods and Services Tax (GST) compliance. With more than 2.6 million small businesses operating in Australia, the ATO is set to send reminder emails to these business owners, emphasising their tax and superannuation responsibilities as part of the ‘Ready for Business’ campaign, aimed at ensuring proper compliance from the outset.
Key Areas of Concern
A major area of focus for the ATO is the collection of GST, with the agency estimating a staggering $8 billion in GST revenue each year goes uncollected due to non-compliance. Small businesses with an annual GST turnover of $75,000 or higher, as well as those providing taxi, limousine, or ride-sourcing services, are mandated to register for GST and make the necessary payments to the ATO.
ATO Deputy Commissioner, Will Day, urges business owners to maintain clear distinctions in their financial practices. "It’s crucial not to be tempted to dip into GST, PAYG withholding, or superannuation funds for cash flow management," Day advised. He recommends that business owners set up distinct bank accounts for these obligations to ensure readiness when payments are due.
Targeting Non-Compliant Operators
In early 2025, the ATO communicated with ride-sourcing operators and taxi drivers, highlighting their focus on compliance within this sector. This outreach led to over 3,000 new GST registrations as non-compliant operators were encouraged to align with taxation laws. "Those operating outside the system will face consequences," warned Day.
In a significant move to enforce compliance, around 3,500 small businesses with a history of non-payment, late submissions, or inaccurate reporting have been switched from quarterly to monthly GST reporting as of April.
Spotlight on Side Hustles
The ATO is also scrutinising the growing number of individuals earning additional income from side hustles, including activities in the gig and sharing economies. According to the Australian Bureau of Statistics, there were approximately one million multiple job-holders as of December, reflecting the economic pressures many Australians face.
Day clarified that if a side hustle becomes profitable, the individual in question must understand their tax, superannuation, and registration responsibilities. "Generally, a business involves continuous and repeated activities aimed at making a profit," he stated. The ATO provides a helpful guide for individuals uncertain about whether their side hustle qualifies as a business and what obligations arise.
Recommendations for New Business Owners
To mitigate unexpected tax liabilities when submitting their first tax returns, new business owners are encouraged to plan ahead. They can opt to enter and prepay their estimated tax liabilities through PAYG instalments when starting their business.
This proactive approach allows for better financial management and helps ensure compliance with tax obligations.
Conclusion
As the ATO ramps up its initiatives to support and monitor small businesses, keeping abreast of GST obligations and employing sound fiscal strategies is crucial for business owners. The advice provided by the ATO, alongside the resources available, reflects a significant effort to ensure a compliant business environment in Australia. Small business owners must take these warnings seriously to avoid potential fines or legal consequences, fostering a healthy and thriving business landscape.
