The Australian Taxation Office has outlined a further compliance focus on businesses that omit income, over-claim deductions or GST credits, or use Business funds for private expenses. The guidance was published on 2 October 2026 and highlights several areas where small businesses can make reporting errors.

The ATO said most small businesses meet their obligations, but it continues to identify cases where income is not fully reported or claims are made incorrectly.

Income Must Be Fully Reported

Businesses are required to report all income, including cash sales and contractor income.

The ATO said it is paying particular attention to businesses that omit cash income or Fail to declare other amounts received through business activities.

Another area of concern is paying workers in cash to avoid tax and Superannuation obligations.

Expenses and GST Credits Must Be Claimed Correctly

The ATO also highlighted over-claimed business deductions and GST credits.

Private expenses should not be claimed as business deductions, and GST credits should only be claimed where the business is entitled to them.

The guidance also notes that using business bank accounts, Credit cards or Business Assets for private expenses can lead to reporting problems.

Keeping business and personal finances separate can make it easier to identify eligible business expenses.

Record Keeping Remains Important

Accurate records are another key part of the ATO’s compliance focus.

Businesses should maintain clear records of income, expenses and other transactions. Digital tools can also be used to help keep business records organised and up to date.

Poor record keeping can make it more difficult to correctly report income and support deductions or GST credit claims.

Compliance Activity Has Increased

The ATO said it uses data, analytics and third-party information to identify businesses that may not be reporting correctly.

Since July 2025, it has engaged with more than 17,000 small businesses where there were indications of omitted income. These engagements resulted in close to A$3 million in amended tax liabilities.

During 2025–26, ATO audits identified more than A$210 million in unpaid taxes.

The ATO also issued more than A$50 million in penalties to businesses that deliberately omitted or under-reported income, including cash payments.

How Businesses Can Get It Right

Businesses are encouraged to report all income, including cash receipts, and keep personal and business finances separate.

They should only claim business deductions and GST credits they are entitled to and maintain accurate transaction records.

The ATO also provides online learning material and small business benchmarks to assist businesses with their tax and reporting obligations.