iscoverConstruction firms and professional service providers can expect greater tax scrutiny after being called out in the ATO’s latest small business focus areas.
Tradies, professional services providers under ATO’s microscope
09 October 2025
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7 minute read
Last Wednesday (1 October), the ATO released its latest small business focus areas, outlining common issues catching its attention and particular industries mired by “recurring issues” with respect to their tax compliance.
It identified the construction industry and the professional, scientific and technical services sector, which includes a wide range of professions from engineers to accountants, as key focus areas.
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“We continue to see recurring issues in specific industries. We’re watching closely, conducting audits, and applying penalties and interest where needed,” ATO assistant commissioner Angela Allen said.
“For small businesses struggling to meet their tax obligations, it is important not to ignore the problem but to seek assistance, whether that is from a tax adviser, a business adviser or the ATO directly.”
Recurring issues with income reporting, expense claims, GST registration, and the research and development tax incentive (R&DTI) offset continued to attract ATO attention.
Common errors included incorrect R&DTI claims, especially for activities that didn’t meet eligibility criteria. Firms also overclaimed expenses and GST credits, omitted sales and income in BAS and tax returns, and failed to register for GST when required, the ATO said.
Some firms also incorrectly reported private expenses as business-related and failed to seek independent advice from a registered tax agent, particularly in head contractor and subcontractor arrangements.
The ATO urged small businesses to take proactive steps to ensure they were getting their tax compliance right, especially those in identified sectors.
In particular, it encouraged businesses to ensure they were reporting all assessable business income, correctly reporting business expenses and reductions, and only claiming the R&DTI when eligible activities had been carried out during the income year, with complete and accurate records to prove it.
Businesses that didn’t meet their reporting obligations could be asked to amend their tax return, be subject to an audit, and face penalties and interest charges, the ATO warned.
The Tax Office said it would continue to support small businesses in understanding their tax obligations. It said that it aimed to help small businesses meet their tax and GST obligations confidently and ensure that honest businesses weren’t disadvantaged.
“As small businesses grow, their tax and super obligations often become more complex,” Allen said.
“We want to ensure that growing small businesses with a turnover of between $1 million to $10 million clearly understand their responsibilities, particularly when it comes to accurately reporting all income, deductions and offsets.”
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