Understanding the ATO’s focus areas for 2025 is crucial to ensuring your business remains compliant and on track. The ATO has outlined specific areas of concern to help you avoid common pitfalls and manage your tax obligations effectively. Here’s what you need to know to keep your business on the right path.

Key Focus Areas for Small Businesses in 2025

The ATO’s primary focus areas for small businesses in 2025 include distinguishing business income from personal income, correctly claiming deductions and concessions, and ensuring all business activities align with the tax system. These areas are essential as they directly affect your business’s financial health and compliance standing.

Business Income is Not Personal Income

It’s critical to separate your business’s finances from your personal funds. This distinction is vital for maintaining accurate financial records and avoiding penalties. The ATO is paying close attention to businesses that use company funds for personal expenses without proper documentation. To avoid errors, familiarize yourself with Division 7A rules, particularly regarding loans, interest declarations, and repayment deadlines.

Deductions and Concessions

Accurately claiming deductions and concessions is another significant focus area. The ATO has observed frequent mistakes in applying small business CGT concessions and non-commercial business losses. Make sure you meet the eligibility criteria for any concessions you claim, as misreporting could result in amended assessments, repayments, and potential penalties. If you’re uncertain about your eligibility or how to apply these deductions correctly, seek guidance from a tax professional.

Operating Within the System

The ATO is committed to ensuring businesses operate within the legal tax framework. Risky behaviours such as underreporting income, over-claiming expenses, or using business funds for personal purposes are under scrutiny. Poor record-keeping and cash flow management can also raise red flags. The ATO encourages businesses to establish strong compliance practices from the beginning to avoid these issues.

How the ATO Supports Compliance

The ATO provides a variety of resources to help small businesses meet their obligations, including educational materials, self-paced courses, webinars, and tailored support. Taking advantage of these resources can help you understand your responsibilities and implement best practices in your business operations.

If the ATO identifies potential issues, they may contact you or your tax professional for clarification. Depending on the severity, this may involve pre-issue contact, direct communication, or more frequent reporting periods. In cases of deliberate noncompliance, stronger actions such as audits, penalties, and legal sanctions may be applied.

Steps to Take If You’re Concerned

If you’re concerned about your business’s tax or superannuation situation, consider these steps:

  • Seek Advice: Engage with the ATO or a registered tax professional for tailored advice.
  • Correct Mistakes: If you discover errors in your tax reporting, act quickly to correct them. You can request an amendment or make a voluntary disclosure to rectify the issue before the ATO contacts you.
  • Report Suspicious Activity: If you suspect tax evasion or other illegal activity, report it confidentially to the ATO.

By staying informed and proactive, you can navigate the ATO’s focus areas confidently and keep your small business on track for compliance and success. The ATO is there to support you in getting it right, so make sure to utilize the available resources and seek professional guidance when needed.

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