Every year the Australian Taxation Office (ATO) signals where it will direct its compliance attention, and the ATO areas of focus for 2025–26 give small business owners a clear roadmap of the tax risks under the microscope. If you run a privately owned business with under $10 million in revenue, understanding these focus areas now is the simplest way to avoid an unexpected review, penalty, or amended assessment later.
Below we break down the key small business tax compliance themes for 2025–26 in plain English, so you can check your own position and know when it's time to talk to your accountant or tax adviser.
Why the ATO's 2025–26 focus areas matter for small business
The ATO has made clear that many of the risks it sees in privately owned and wealthy groups come down to three things: weak tax governance, poor record keeping, and not getting specialist advice at the right time. For a growing small business, these gaps are easy to fall into — especially when your structure evolves faster than your bookkeeping. Getting the fundamentals right is the single best protection against a compliance headache.
Key point: The ATO doesn't publish its focus areas to catch people out — it publishes them so you can self-correct. Reviewing your position against this list before lodgement is far cheaper than responding to a review afterwards.
Core tax and compliance issues
The foundational expectations haven't changed, but they remain firmly in the spotlight. The ATO wants every business to register for the right obligations (such as PAYG withholding and GST), choose the correct accounting basis, and lodge tax returns, activity statements, FBT returns and taxable payments annual reports on time. Paying tax debts by the due date — and reaching out early if you need support — also signals good faith.
On the reporting side, the ATO is watching for:
- Incomplete returns and omitted or underreported income
- Incorrectly claimed base rate entity status (and therefore the wrong company tax rate)
- Overclaimed deductions that aren't properly substantiated
- Overclaimed GST credits and fuel tax credits
- R&D tax incentive claims without adequate supporting evidence
The lesson for small business owners is simple: keep evidence for every claim.
Division 7A: using company money for personal purposes
Division 7A for small business is one of the biggest recurring risk areas. If your private company lends money to you as a shareholder (or to an associate), that loan needs a complying agreement, the correct benchmark interest rate, and minimum yearly repayments. The ATO is targeting unreported shareholder loans, non-complying loan agreements, and repayments that are really just re-borrowed funds from the same company. If you've ever paid a personal expense from the company account, this is worth reviewing carefully.
Watch out: A Division 7A breach doesn't just create a tax bill — the loan is treated as an unfranked dividend, meaning you're taxed at your full marginal rate with no franking credit to offset it. It's one of the most expensive mistakes a company owner can make.
Capital gains tax and the small business CGT concessions
The small business CGT concessions are valuable but tightly conditioned, and the ATO is focused on taxpayers claiming them without meeting the eligibility requirements. It's also scrutinising the small business restructure rollover and businesses that restructure specifically to access concessions they otherwise wouldn't qualify for. Before you rely on a CGT discount or concession, confirm the eligibility tests are genuinely met and documented.
Trusts and trust distributions
If your business operates through a family or discretionary trust, trust distributions are a priority area. The ATO is looking at distributions to lower-taxed beneficiaries where the economic benefit flows elsewhere (Section 100A reimbursement agreements), circular distributions, and family trusts distributing outside the family group — which can trigger family trust distribution tax. The ATO has flagged concern about limited awareness of how quickly these liabilities compound, so trust owners should review their distribution resolutions each year.
We covered this area in detail in our guide to the ATO crackdown on income splitting, which is essential reading if you distribute trust income to family members.
Not Sure Where Your Business Stands?
If Division 7A loans, trust distributions or CGT concessions apply to your business, a short review now is far cheaper than an ATO amendment later. We review structures for Perth business owners and give you a plain-English picture of your position. Book a free 15-minute call to get started.
Book a Free Call →GST compliance for retail, property and beyond
GST compliance for small business features heavily across several industries. In retail, the ATO sees reporting errors from inadequate systems, especially during growth or restructuring. In property and construction — a significant slice of the WA economy — it's focused on property "flipping," subdivisions, and the correct use of the margin scheme and going concern rules. Across the board, GST refund fraud involving artificial transactions between related entities is under active surveillance.
If you're unsure whether your activity statements are being prepared correctly, our explainer on what a BAS is and how to lodge it covers the basics.
Division 7A Loan Health Check
Twelve questions to find out whether money you've taken out of your own company is about to be taxed as an unfranked dividend — plus the current benchmark rate, a worked example of what one missed repayment costs, and your options if you've already slipped. Updated for 2026–27.
✓ Your download has started — check your downloads folder.
Industries and activities in the spotlight
Beyond the core issues, the ATO has named several specific sectors and activities for 2025–26:
- Property and construction
- Retail
- Private equity
- Crypto assets
- Cross-border transactions
- Retirement villages
- Professional firms allocating practice profits
There's also continued attention on lifestyle assets — where a hobby is dressed up as a business — and on the misuse of tax-exempt or concessionally taxed entities such as SMSFs and not-for-profits.
Succession planning
As many family-owned businesses change hands or transfer wealth to the next generation, succession planning tax risks are a growing focus. Moving assets around a group, restructuring family interests, settling Division 7A loans and reviewing the pre-CGT status of assets all carry tax consequences that are easy to overlook.
What small business owners should do next
The through-line across every 2025–26 focus area is strong tax governance: keep clear records, report accurately, substantiate every claim, and seek specialist advice before major transactions or restructures.
A practical starting point:
- Confirm every registration you need is in place and every lodgement is up to date
- Review any company loans to shareholders or associates for Division 7A compliance
- Check your trust distribution resolutions are signed before 30 June each year and commercially defensible
- Test CGT concession eligibility before you rely on it in a return
- Reconcile your GST position and make sure your bookkeeping system keeps up with your growth
- Keep substantiation for every deduction, GST credit and incentive claim
If any of the areas above apply to your business — particularly Division 7A, trust distributions, CGT concessions or GST — now is the time to review your position with a registered tax agent rather than waiting for the ATO to come to you.
My closing view
Staying ahead of the ATO areas of focus for 2025–26 isn't about fear; it's about running a cleaner, more resilient business. A short compliance check today can save you significant time, stress and money down the track.
Our Perth small business accounting service includes tax planning, structure reviews and compliance health checks for sole traders, companies and family trusts — with fixed fees agreed before any work begins. You can also see our transparent pricing upfront.