Mistakes, Penalties and Official Sources
Small business accounting mistakes that cost the most in Australia, and how to avoid them
The accounting and tax mistakes that cost Australian small businesses most, from mixing personal spending and late BAS to Division 7A, super timing and unregistered advisers.
The mistakes that cost Australian small businesses most are rarely complicated. They are mixing personal and business money, lodging late or not at all, treating GST and PAYG withholding as working capital, taking money out of a company without the right paperwork, paying super late, using an unregistered adviser, and poor records. Each creates a cost on top of the accountant's fee: penalties, interest that is no longer tax deductible, clean-up bills, or in the worst case personal liability for company directors. Almost all of them are cheaper to prevent than to fix.
This is the overview guide for the mistakes and sources section. Patterns are described generally; examples are illustrative.
The mistakes, ranked by how often they become expensive
| Mistake | What it costs | How to prevent it |
|---|---|---|
| Mixing personal and business spending | Hours of accountant clean-up; wrong GST credits; Division 7A issues in companies | Separate bank accounts and cards |
| Late BAS and returns | Failure to lodge penalties; lost access to agent lodgement dates | Lodge on time even if you cannot pay |
| Spending GST and withholding | ATO debt; non-deductible interest; director penalty exposure | Move GST and PAYG into a separate account each week |
| Director drawings without paperwork | Deemed dividends under Division 7A | Pay salary through payroll, declare dividends, or document loans |
| Late or missed super | Superannuation guarantee charge; under Payday Super, more frequent timing tests | Pay super each pay run; confirm receipt |
| Contractors who are really employees | Unpaid super, PAYG, award entitlements | Check the employment relationship |
| Unregistered tax adviser | Wrong lodgements; no TPB protection | Check the TPB register |
| Poor records | Disallowed deductions; penalties in an audit | Keep digital records for five years |
Mistake 1: one account for everything
When personal and business transactions share an account, every one has to be sorted at year end. In a company, personal spending through the company account is a payment to the director that has to be treated as salary, a dividend, a repayment of a loan the company owes the director, or a loan from the company that may fall under Division 7A. Accountants charge for working this out. A second bank account costs little; the clean-up can cost hundreds or thousands.
Mistake 2: not lodging because you cannot pay
Many owners delay a BAS because they cannot pay it. That turns one problem into two: a failure to lodge on time penalty, and a debt the ATO cannot set up a payment plan for until the BAS is lodged. For companies, unreported PAYG withholding, GST and super guarantee charge also make lockdown director penalties possible. Lodge on time and then contact the ATO about payment. See ATO penalties and interest and director penalty notices.
Mistake 3: treating the ATO as a lender
GST collected and PAYG withheld are not the business's money. Using them for cash flow builds an ATO debt that attracts the general interest charge, which since 1 July 2025 is not deductible. A simple fix: each week, transfer an estimate of GST and PAYG owed into a separate savings account.
Illustrative example: weekly sales of $11,000 including GST contain $1,000 of GST. If purchases carry $300 of GST credits and wages have $900 withheld, transfer about $1,600 a week.
Mistake 4: taking money out of a company casually
Directors who transfer money to themselves without a payroll entry, dividend resolution or written loan agreement risk deemed dividends under Division 7A of the Income Tax Assessment Act 1936. The accountant may need to create a complying loan agreement before the company's return is lodged, with minimum yearly repayments in later years. Plan drawings with your accountant before 30 June, not after.
Mistake 5: super paid late or wrongly
Since 1 July 2026, super must be paid with each wage payment and generally reach the fund within 7 days. Paying quarterly out of habit, or paying the wrong fund, can trigger the superannuation guarantee charge. See Payday Super mistakes and costs.
Mistake 6: an adviser who is not registered
Someone who offers to prepare your tax return or BAS for a fee must be registered with the Tax Practitioners Board. Using an unregistered person removes the protections of the Code of Professional Conduct and can lead to wrong lodgements. See unregistered tax agent risks.
Mistake 7: records that would not survive a review
Records generally need to be kept for five years, in English or readily convertible, and must explain your transactions. Cancelling software without exporting data, or relying on thermal paper receipts that fade, can leave claims unsupported. See record keeping requirements.
If something has already gone wrong
- Lodge anything outstanding, even with estimates your agent is comfortable with.
- Talk to a registered tax agent about voluntary disclosure: penalties are generally reduced when you tell the ATO about an error before it starts an audit.
- Contact the ATO about a payment plan once lodgements are up to date.
- If you are a director who has received a director penalty notice, get advice immediately; the time limits are short.
- If an adviser caused the problem, see the complaints guide.
The Australian Small Business and Family Enterprise Ombudsman and state small business commissioners can also point you to support if tax debt is part of a wider financial problem.
Frequently asked questions
What is the most common mistake accountants see?
Patterns vary by practice, but unreconciled books and mixed personal spending are widely cited as the main drivers of extra fees.
Will the ATO reduce penalties if I come forward?
Penalties are generally reduced for voluntary disclosure made before an audit is notified. Your agent can make the disclosure.
Is a mistake in my BAS a crime?
Honest mistakes are generally corrected through amendments and may attract administrative penalties. Deliberate false statements are treated much more seriously.
Can my accountant fix past years?
Yes, within the time limits for amendments, which vary by taxpayer type and situation. Expect the work to be billed.
Sources and where to check
- Australian Taxation Office — penalties, voluntary disclosure, payment plans, Division 7A
- Tax Practitioners Board — registered agents and complaints
- Australian Small Business and Family Enterprise Ombudsman — support for small businesses in difficulty
- business.gov.au — managing tax and cash flow
- Fair Work Ombudsman — employees vs contractors and pay obligations
