Is Your Business Tax Compliant? Warning Signs You’re Doing It Wrong

Running a business comes with numerous responsibilities, and staying tax compliant is one of the most important. If you don’t follow tax laws, you could face hefty fines, audits, or even legal trouble. These consequences can seriously hurt your business and its future, much like how ignoring the rules of the road can lead to accidents and penalties.

Many business owners want to do the right thing but still end up making mistakes. Often, this happens because they don’t fully understand what’s required to stay compliant. The tax system can be complex, with many obligations to keep track of, and overlooking even small details can lead to big problems.

Key Takeaways

Staying tax compliant is critical to protecting your business and ensuring sustainable growth. Here’s what to watch for:

• Missing tax deadlines or poor record-keeping can lead to costly penalties and audits.
• Unclaimed deductions and GST mismanagement are common pitfalls that hurt your cash flow.
• Frequent ATO communication is a sign your filings may need closer attention.

With proactive planning, accurate record-keeping, and expert guidance, you can avoid these risks and focus on growing your business confidently.In this blog, we’ll cover the key warning signs that your business may not be tax compliant and show you how to fix these problems, with insights drawn from Ashman Accounting’s years of experience helping Adelaide businesses.‍

What Does ‘Tax Compliance’ Mean for Businesses?

‍Tax compliance means following all the tax rules that apply to your business. It includes filing your tax returns on time, paying the right amount of tax, and keeping accurate records. For Australian businesses, tax compliance involves:

• Lodging tax returns by the deadlines.
• Submitting Business Activity Statements (BAS) on time.
• Registering for Goods and Services Tax (GST) if your revenue exceeds $75,000 per year.
• Deducting and paying Pay-As-You-Go (PAYG) tax for employees.

Think of tax compliance as maintaining a healthy engine in your car. Just like skipping oil changes can cause long-term damage, neglecting your tax obligations can lead to costly consequences. These include:

• Fines and interest charges for late payments or filings.
• Unnecessary stress and time spent dealing with the Australian Taxation Office (ATO).
• Damaged reputation and strained relationships with clients or partners.

At Ashman Accounting, we’ve seen firsthand how these issues can derail businesses. Our goal is to help you identify and address potential compliance gaps before they become major problems.

‍Warning Signs Your Business Isn’t Tax Compliant

1. Missed Tax Deadlines

‍Missing tax deadlines is one of the most common signs of non-compliance. According to the ATO, over 20% of small businesses face penalties each year for late lodgements, resulting in unnecessary expenses and stress. These deadlines include:

• Annual company tax returns.
• Quarterly BAS submissions.
• Superannuation guarantees payments for employees.

Real Example: An Adelaide-based logistics firm we supported had missed multiple superannuation deadlines due to poor tracking systems. This not only led to fines but also hurt their relationship with employees. Our team introduced automated reminders and created a compliance calendar, ensuring they never missed another deadline while restoring trust with their staff.

‍How to Fix It:

• Use accounting software that sends automatic deadline reminders.
• Work with a professional accountant who will keep track of all your compliance dates and handle submissions on time.
• Conduct quarterly reviews to ensure all upcoming obligations are accounted for.

‍2. Inconsistent Record-Keeping

‍Accurate record-keeping is the backbone of tax compliance. Without it, your business risks making costly errors in tax filings, leading to audits and penalties. In fact, poor record-keeping has been a significant factor in errors flagged by the ATO. Signs that your record-keeping might need improvement include:

• Missing or misplaced invoices and receipts.
• Disorganised financial documents scattered across systems or physical files.
• Bank accounts that don’t reconcile with your business's financial records.

‍Real Example: One of our restaurant clients came to us struggling with disorganised financial records—paper invoices were stored haphazardly, and digital records were spread across multiple platforms. These inconsistencies caused discrepancies in their GST reporting, putting them at risk of an ATO audit.We stepped in to streamline their bookkeeping by consolidating all their records into a single cloud-based accounting system. With clear processes for tracking expenses and reconciling revenue, they not only regained compliance but also gained full visibility into their cash flow.

‍How to Fix It:

• Hire a Professional Bookkeeper: A skilled bookkeeper can ensure your financial records are always up to date and organised, reducing the risk of errors.
• Reconcile Regularly: Conduct monthly reconciliations to identify and resolve discrepancies before they become bigger issues.
• Embrace Digital Tools: Transition to reliable accounting software like Xero or MYOB to centralise and organise your records.
• Create Redundancies: Maintain both digital and physical backups of key documents to protect against accidental loss or technical failures.

Investing in proper record-keeping isn’t just about compliance - it’s about creating a foundation for informed business decisions and long-term success.

‍3. Unclaimed or Incorrect Deductions

‍Claiming tax deductions can reduce your taxable income, but nearly 40% of small businesses either miss deductions they’re eligible for or make errors, according to a recent ATO audit review. Common mistakes include:

• Forgetting to claim home office or vehicle expenses.
• Incorrectly classifying business and personal expenses.
• Miscalculating depreciation for assets.

Real Example:
A tradesman client approached us after realising they hadn’t claimed depreciation on tools worth $20,000 over a two-year period. These tools were critical to their business operations, but the missed deductions meant they had paid significantly more in taxes than necessary. After reviewing their financial records, we filed an amended return and optimised their future deductions, resulting in over $6,000 in tax savings.

‍How to Fix It:

1. Engage a Tax Professional: An experienced accountant can help identify deductions you might have overlooked and ensure that your claims align with ATO regulations.
2. Implement Detailed Expense Tracking: Use tools like Xero or MYOB to track expenses in real time. Categorise every expense clearly to avoid misclassification.
3. Leverage Tax Rule Changes: Stay informed about policies like instant asset write-offs, which allow you to claim immediate deductions for eligible business purchases.
4. Review Regularly: Schedule an annual review of your deductions to ensure you’re not missing out on savings as your business grows or regulations change.

Why It Matters:
Maximising your deductions doesn’t just save money—it improves your cash flow and allows you to reinvest in your business. At Ashman Accounting, we specialise in providing expert accounting advice to help businesses like yours navigate the complexities of tax rules and uncover every possible deduction.

‍4. Not Registered for GST When Required

‍In Australia, businesses earning over $75,000 per year must register for GST. Yet, the ATO reported in 2023 that 1 in 4 small businesses failed to register on time, resulting in penalties and backdated tax obligations. This oversight can quickly escalate into a financial burden, especially if high-value contracts are involved.

‍Real Example: One Adelaide-based marketing agency we assisted exceeded the GST threshold but hadn’t registered due to a misunderstanding of their obligations. When the ATO flagged their earnings during a routine review, they faced significant penalties and backdated taxes. Our team stepped in to resolve the issue, ensuring compliance and negotiating a manageable payment plan to avoid severe cash flow disruptions.

‍How to Fix It:

• Regularly review your revenue to assess GST obligations, especially during periods of growth.
• Use accounting software with automated revenue tracking to identify when you cross the $75,000 threshold.
• Seek guidance from a professional accountant to handle the registration process promptly and accurately.

By proactively monitoring your income and engaging professional advice, you can avoid falling into this common compliance trap.

‍5. Frequent ATO Communication or Audits

‍If your business is receiving frequent letters, calls, or audit notifications from the ATO, this is a significant red flag. In 2022, over 1.8 million businesses were flagged for compliance reviews, with many audits triggered by inconsistencies in PAYG withholding or errors in BAS submissions.

‍Real Example: A manufacturing client came to Ashman Accounting after receiving multiple ATO notices due to discrepancies in their PAYG withholding reports. They hadn’t reconciled payroll data correctly, leading to mismatches between reported and actual payments. These errors not only raised suspicion but also delayed their operations due to repeated audits. Our team conducted a full tax health check, corrected all discrepancies, and implemented automated payroll reconciliation systems, ensuring long-term compliance.

‍How to Fix It:

• Prepare for audits by maintaining accurate, up-to-date records. Reconcile payroll, GST, and BAS data regularly to ensure consistency.
• Address ATO notices promptly. Delaying responses can escalate the situation and lead to further scrutiny.
• Engage professional support. Accountants can review your tax filings for errors and provide representation during audits to minimise disruption.

By maintaining accurate records and addressing compliance gaps proactively, you can significantly reduce the risk of costly audits and safeguard your business reputation.

‍How Ashman Accounting Can Help

‍At Ashman Accounting, we specialise in helping Adelaide businesses meet their tax compliance needs. Here’s how we can support you:

• Preparing and lodging BAS accurately and on time.
• Offering expert tax advice and planning tailored to your business.
• Providing reliable bookkeeping services to keep your records organised.
• Conducting tax health checks to identify and address compliance risks before they escalate.

Our team has the local expertise and experience to navigate Australia’s complex tax landscape. Whether it’s identifying missed deductions, fixing past errors, or ensuring ongoing compliance, we’re here to make tax compliance stress-free.Let Ashman Accounting Handle the Complexities for YouStaying tax compliant is essential for every business. Ignoring the warning signs of non-compliance can lead to serious problems, like fines, audits, or legal issues.By addressing these signs and taking proactive steps, you can protect your business and avoid unnecessary stress. Take control of your tax obligations now. Contact Ashman Accounting today and let us help your business thrive!