Australia’s small businesses are the backbone of the economy, and as we move into the 2024–25 financial year, new tax obligations are on the horizon. The Australian Government and the ATO (Australian Taxation Office) have introduced several changes aimed at boosting compliance, improving transparency, and supporting economic recovery.
If you’re a sole trader, company director, or small business owner, now is the time to understand how these changes impact your operations. Staying compliant with Financial Services and Tax Law is not just about avoiding penalties—it’s about future-proofing your business.
Increased Scrutiny and Reporting Through STP Phase 2
Single Touch Payroll (STP) Phase 2 is in full effect, and small businesses are now required to provide more detailed payroll information to the ATO with every pay run. This includes:
Disaggregation of gross income (e.g. separating allowances, bonuses, overtime)
Tax file number declarations
Employment conditions and income types
Action: Ensure your payroll software is STP Phase 2 compliant and that your HR/payroll team is trained to meet these reporting standards.
Why it matters: The ATO will use this data to pre-fill business and individual tax returns, cross-check superannuation compliance, and monitor fringe benefits tax (FBT) and leave entitlements.
Super Guarantee Increases to 11.5%
From 1 July 2025, the superannuation guarantee (SG) rate will rise from 11% to 11.5%, continuing its gradual path to 12% by 2026. Employers must pay this increased rate on employees’ ordinary time earnings.
Action: Update payroll systems and factor the additional SG into your cash flow forecasts.
Non-compliance risk: Failing to meet super obligations can result in hefty penalties, including the Superannuation Guarantee Charge (SGC), which is non-deductible.
Tax Cuts for Small and Medium Enterprises (SMEs)
To boost productivity and economic growth, the 2025 tax year will see the continuation of small business tax rate reductions:
Base rate entity companies (turnover under $50 million) will pay 25% corporate tax, continuing from the prior year.
Unincorporated businesses (e.g. sole traders, partnerships) may benefit from the small business income tax offset, though it remains capped at $1,000 per year.
Action: Consult with a tax advisor to see whether you’re eligible for offsets or whether restructuring may provide better tax outcomes.
Instant Asset Write-Off Threshold Adjustments
The instant asset write-off threshold, which had temporarily increased during COVID-19 support periods, is now subject to annual review. For 2025, the threshold is expected to revert to $20,000 for eligible small businesses with aggregated turnover under $10 million.
Action: Plan major equipment purchases accordingly and ensure assets are installed and ready for use within the financial year.
Note: Assets above the threshold can still be depreciated over time under simplified depreciation rules.
Digital Record-Keeping Expectations
The ATO continues to emphasise digital compliance. Small businesses must adopt digital record-keeping systems that meet the ATO’s standards for audit readiness.
Action: Make 2025 the year your business goes paperless to reduce compliance risks and improve tax time efficiency.
Crackdown on Non-Compliant Deductions
The ATO has flagged small business deductions as a key audit area for 2025, particularly:
Home office deductions
Motor vehicle claims
Repairs and maintenance
Asset depreciation claims
Action: Keep clear records and seek professional advice when claiming deductions. Improper claims can trigger audits and penalties.
Director ID Compliance and ASIC Obligations
Directors must now hold a valid Director Identification Number (Director ID). This mandatory ID system is designed to prevent phoenixing and ensure transparency across company structures.
Action: If you haven't already applied for your Director ID, do so immediately via the ABRS portal.
New Compliance Focus: Contractor vs Employee
The ATO is actively reviewing businesses that misclassify workers. If you're hiring contractors, you must ensure:
They genuinely operate as independent businesses
You meet your PAYG withholding and super obligations (if applicable)
Contracts are clear and compliant
Stay Compliant with Expert Legal Advice
Navigating the evolving landscape of Financial Services and Tax Law in Australia can be overwhelming, especially for small business owners juggling daily operations. Legal and financial compliance is not just about avoiding audits—it’s about protecting your livelihood.
At New South Lawyers, our financial services and tax law experts can:
Don’t let your business fall behind. The ATO is increasing its use of data-matching, AI-based risk identification, and digital auditing tools. Now more than ever, staying ahead of your obligations is essential.
Contact New South Lawyers today. We’ll help you understand your obligations, make proactive changes, and keep your business compliant in 2025 and beyond.
