If your New Year’s reset hasn’t stretched beyond a fresh diary and a strong coffee, the ATO reckons now’s a good time to widen the lens, especially when it comes to tax.

The ATO is urging small businesses to start 2026 by tightening up the basics, saying most compliance problems come down to everyday habits that slip when you’re busy running the show.

ATO Assistant Commissioner Angela Allen says January is a good time to reset before small issues snowball.

“Every year we see small businesses run into avoidable issues because they haven’t kept accurate records, reported all their income or managed their cash flow effectively,” Allen said.

Small mistakes = big dollars warns ATO

According to the ATO, honest errors are a major reason behind the $27.2 billion small business income tax gap.

“Part of the $27.2 billion small business income tax gap is driven by mistakes, so it’s important to be aware of the ATO’s small business focus areas and if you’re unsure seek support early,” Allen said.

Allen suggests one of the easiest ways to stay out of trouble is getting advice from a registered tax practitioner, particularly when things get tricky or time-poor decisions start creeping in.

Don’t ghost the ATO

The ATO is ramping up efforts to recover more than $50 billion in unpaid tax, and small business debts continue to climb.

Allen says ignoring the problem only makes it worse.

“If for some reason you can’t pay in full or on time, our number one tip is to not stick your head in the sand. Engage with us or your registered tax practitioner early to discuss your options,” she said.

She also warned against treating the tax office like a handy overdraft.

“The ATO is not a bank or a cheap source of finance. Deliberately delaying tax payments to fund your business creates an unfair advantage over the many small businesses that are doing the right thing and paying on time.”

Fixing your cash flow stress

Cash flow is still the number one stressor for many small business owners, especially when BAS time rolls around and the numbers don’t quite add up.

The ATO suggests one practical fix is separating your tax money from your everyday operating cash.

“Keeping separate bank accounts for these obligations makes it easier to meet your commitments and avoid unexpected shortfalls,” Allen said.

That means hands off the GST and PAYG.

“Don’t be tempted to dip into GST you’ve collected, or PAYG withholding collected on behalf of your employees, as a way to bolster your cash flow.”

Short-term relief, the ATO warns, often turns into a much bigger problem when the bill eventually lands.

Good records = fewer dramas

The ATO continues to see income missed from tax returns, particularly in businesses that take cash or keep patchy records.

“Accurate, consistent and complete record keeping isn’t just a good idea – it’s a requirement,” Allen said.

If your filing system involves a drawer, a shoebox or a vague mental note, the ATO says it’s time to go digital. Sole traders can use tools in the ATO app like myDeductions and the business performance check tool, while online services let businesses track lodgements and outstanding debts.

Payday Super is coming

From 1 July 2026, businesses will need to pay super guarantee contributions each payday.

The ATO is urging small businesses to start planning now rather than scrambling later.

“Review your payroll systems and super processes and get ready to pay super guarantee more frequently,” Allen said.

What’s on the ATO’s radar in 2026

The ATO updates its small business compliance focus areas every quarter and publishes them on its website, so business owners know exactly what’s getting extra attention.

“It’s all about being transparent about the compliance risks on our radar so small businesses can continue to get it right in 2026,” Allen said.

Where the ATO sees deliberate non-compliance, including shadow economy behaviour, it says firmer action will follow.

Shutting up shop? Do it properly

For business owners wrapping up their business in 2026, the ATO has guidance on cancelling ABNs, lodging final returns and meeting payroll and super obligations for the last time.

“If you decide it’s time to move on, closing your business the right way helps avoid future compliance issues,” Allen said.

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