Nobody sets out to get their tax wrong. But for most small business owners, tax is something that gets dealt with reactively, scrambled together at the end of the financial year, rather than managed throughout it.
The result? Mistakes that cost real money. Sometimes it’s paying more tax than you need to. Sometimes it’s missing deadlines and copping penalties. Sometimes it’s an ATO review that could have been avoided entirely with better records.
The good news is that most of these mistakes are preventable. Here are the ones we see most often at FMS Group and what you can do about them.
Treating Tax as a Once-a-Year Event
This is the big one. When tax only gets attention in June, you lose the ability to do anything meaningful with it. Decisions made throughout the year, how you time income, how you structure expenses, whether you invest in equipment, all have tax consequences that can’t be undone after the fact.
Proactive tax planning means having those conversations in July, not June. It means structuring your year with your tax position in mind, not just reporting on it afterward.
At FMS Group, tax planning is built into our client relationships as an ongoing conversation, not an annual event.
Mixing Personal and Business Finances
Running personal and business expenses through the same account is one of the most common habits we see and one of the most damaging at tax time. It creates messy records, makes it difficult to identify legitimate deductions, and raises red flags in the event of an ATO review.
The fix is straightforward: a dedicated business bank account, used consistently. It takes an afternoon to set up and saves significant headaches down the track.
Under-Claiming or Over-Claiming Deductions
Both ends of this mistake are costly. Under-claiming means paying more tax than you legally need to. Over-claiming whether intentional or not, creates compliance risk and potential penalties.
Common deductions that small businesses either miss or misapply include:
- Business-related vehicle use (with a proper logbook)
- Home office expenses if working from home
- Professional development and training
- Accounting, legal and advisory fees
What you can and can’t claim depends on your specific business and circumstances. Getting proper advice ensures your claims are accurate, compliant, and maximised.
Getting GST Wrong
For businesses registered for GST, errors in BAS reporting are more common than most people realise. Applying GST to exempt supplies, claiming input tax credits incorrectly, or simply miscalculating because the records aren’t reconciled these are all mistakes the ATO looks for.
Regular reconciliation is the key habit here. Checking your accounts against your BAS before lodgement rather than rushing it through at the deadline, catches most errors before they become a problem.
Leaving Record-Keeping Until It’s Urgent
Poor records are behind almost every other tax mistake on this list. When documentation is incomplete or disorganised, it’s nearly impossible to prepare an accurate return, defend a deduction, or respond to an ATO query with confidence.
The businesses that handle tax most smoothly are the ones that treat record-keeping as a routine, not a crisis response. Cloud accounting software makes this significantly easier, and the time investment upfront pays for itself at every BAS and year-end.
If your current system involves a shoebox or a folder of PDFs you haven’t opened since last year, that’s worth fixing now.
Missing Deadlines
The ATO charges penalties and interest on late lodgements and payments and these add up quickly. BAS deadlines, PAYG instalments, and annual return dates are all fixed points in the calendar that need to be managed proactively, not reactively.
At FMS Group, we keep clients on top of key dates with clear timelines and early reminders, so nothing gets missed, even during busy periods.
The Common Thread
Most tax mistakes don’t happen because business owners are careless. They happen because tax is complex, time is limited, and there’s no system in place to stay ahead of it.
The fix isn’t working harder, it’s getting the right support in place early. With clear processes, good records, and an accountant who’s engaged throughout the year, tax becomes a manageable part of running your business rather than a source of stress.
You Don’t Have to Figure It Out Alone
At FMS Group, we work with small business owners to get their tax position right – not just at lodgement time, but throughout the year. If any of the mistakes above sound familiar, it’s worth having a conversation.
Book a consultation today with FMS Group by calling 1300 982 499.
Disclaimer: This blog is general in nature and does not constitute personal financial advice. Please consult a qualified financial professional before making decisions based on your individual circumstances.