Compliance
Compliance: How Small Businesses Can Navigate Rising ATO Enforcement
Australia is boosting its tax compliance programmes and expanding enforcement, meaning small businesses should act now to stay ahead of recent ATO strategies.
By NomadicTax Research Team • 5-8 min read • November 23, 2025
## The Changing Compliance Landscape
The 2025-26 Budget allocates **AUD 999 million** over four years to the Australian Taxation Office (ATO) to **extend and expand tax compliance activities**. Key programmes and funding include:
- AUD 717.8 million to extend the **Tax Avoidance Taskforce**, focusing on **multinationals and large taxpayers**. ([taxnews.ey.com](https://taxnews.ey.com/news/2025-0763-australias-2025-26-federal-budget?utm_source=openai))
- AUD 155.5 million to expand the **Shadow Economy Compliance Program**, targeting **under-reported income, worker exploitation, illicit trade**, etc. ([taxnews.ey.com](https://taxnews.ey.com/news/2025-0763-australias-2025-26-federal-budget?utm_source=openai))
- AUD 75.7 million for the **Personal Income Tax Compliance Program**, which deals with individual taxpayer behaviour. ([taxnews.ey.com](https://taxnews.ey.com/news/2025-0763-australias-2025-26-federal-budget?utm_source=openai))
- AUD 50 million from **1 July 2026** to extend the **Tax Integrity Program** for medium/large businesses and wealthy groups ensuring timely compliance with tax & superannuation liabilities. ([taxnews.ey.com](https://taxnews.ey.com/news/2025-0763-australias-2025-26-federal-budget?utm_source=openai))
## What Small Businesses Need to Anticipate
**Increased risk of audits and reviews**: As the ATO focuses on shadow economy and personal income non-compliance, businesses with informal income channels or misclassified worker arrangements may come under greater scrutiny.
**Greater compliance burden**: Requirements around reporting, withholding and documentation may tighten.
**Professional conduct matters**: For tax agents and practitioners, the Government plans to **strengthen sanctions** via the Tax Practitioners Board and modernise registration frameworks. High-risk behaviours will attract enhanced attention and regulatory action. ([au.andersen.com](https://au.andersen.com/federal-budget-report-2025/?utm_source=openai))
## Actionable Steps for Compliance
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## Actionable Steps for Compliance
**Review and tidy records:**
- Ensure accurate reporting of all business transactions and classifications (employees vs contractors).
- For fringe benefits, superannuation, deductions—double-check they align with current law. Missing or incorrect amounts on income statements can lead to amendments.
**Engage with tax agents carefully:**
- Choose agents registered with the TPB.
- Ask for written advice and maintain records of advice—some TPB reforms could expose agents to disciplinary actions.
**Monitor changing thresholds and reporting obligations:**
- Identify if your business or you personally are crossing thresholds that trigger more stringent reporting (e.g. foreign ownership, large transactions, foreign resident CGT changes).
- Ensure systems are ready for ATO notifications if applicable.
**Proactive lodgment and payment of liabilities:**
- Avoid cash-flow issues by planning for earlier or more frequent tax and super payments.
**Engage in compliance programs where available:**
- Watch for shadow economy incentives, schemes or voluntary disclosures that might reduce exposure.
## Example Case Study
> **Boutique Café Owner** – “CafeBrew Pty Ltd”
**Situation:** Under-declared income via take-away cash sales; informal record-keeping; no proper classification of staff vs contractors.
**Risk under new compliance push:** Shadow economy compliance program may lead to audit or estimation of income. If unregistered agent gave advice that breaks TPB rules, agent (or the business) could face penalties.
**Preventive actions:**
- Begin using point-of-sale systems that capture all sales—card + cash.
- Regular bank reconciliation and mandatory receipts.
- Register all employees appropriately.
- Seek a TPB compliant agent and document communications.
## Conclusion
With enforcement increasing substantially, small businesses must act now to **strengthen documentation**, **stay compliant**, and **seek good professional advice**. The risk of penalties, reputational damage, and surprise ATO audits is higher—but manageable with proactive compliance work.