ATO’s 2025 Focus Areas for Small Businesses

What’s Under the Microscope

Each year, the ATO signals where its compliance teams will be focusing — and for small businesses in 2025, the message is clear: don’t cut corners on reporting, tax timing, or record keeping.

The April update outlined several key areas where small business tax behaviour will be reviewed more closely. And while these are perennial pressure points, the ATO is now combining real-time data analytics with traditional audit activity to close the gap between declared and actual behaviour.

Key compliance focus areas for FY25

According to the ATO, the major areas under review are:

1. Under-reporting income

Businesses that:

Have mismatches between BAS income and tax return totals
Omit cash or digital payments (e.g. PayPal, Square, Stripe)
Fail to declare income picked up via bank feeds, third-party data, or STP

The ATO will be matching bank data, POS data, and merchant facility statements against lodgements. Income suppression — whether deliberate or careless — is firmly in focus.

2. Over-claiming deductions

Particular scrutiny will apply to:

Non-business use of business assets
Private expense deductions disguised as business (e.g. travel, vehicles, home office)
Excessive stock write-offs or bad debt claims

Expect follow-ups where deduction patterns don’t align with industry norms or turnover levels.

3. GST reporting mismatches

The ATO is ramping up its review of:

GST collected vs reported
Incorrect coding of BAS transactions
Claims for input tax credits on private or ineligible expenses

Mismatch between sales figures and GST paid remains a red flag — particularly where quarterly figures spike or dip without explanation.

4. Lodgement and payment timeliness

Failure to lodge on time and persistent late payments (even when extensions are granted) may trigger more than just penalties — they may lead to a forced switch to monthly lodgement cycles or increased audit risk.

This is especially relevant in light of the ATO’s recent move to shift non-compliant small businesses to monthly GST reporting.

What practitioners should do now

This is a prime opportunity to:

Audit internal processes or software settings to ensure GST coding and expense classification are accurate.

Run proactive reconciliations between BAS, tax returns, and accounting data.

Flag clients with repeated lodgement delays or cash reporting anomalies.

Educate clients on deduction eligibility, particularly where lifestyle and business costs overlap.

Also consider whether accounting file access (e.g. Xero, MYOB, QuickBooks) is up to date — the ATO increasingly uses practitioner data sources to conduct desk audits without formal notice.

Final Thoughts

The ATO’s focus on small business compliance is getting sharper — not broader. These are targeted interventions, powered by matching technology and behaviour profiling. For firms and their clients, it’s no longer enough to be “mostly compliant.”

2025 will reward systems, consistency, and transparency — and penalise shortcuts.