Starting April 1 2025, the Australian Taxation Office (ATO) will require small businesses with a history of GST non-compliance to switch from quarterly to monthly reporting.
The change will likely impact around 3,500 small businesses, with an ATO expectation that this change will enhance GST compliance and foster good business practices.
What is the ATO’s rationale?
The announcement came from the ATO’s observation that small businesses that voluntarily changed their GST reporting and payment cycle to monthly have found it easier to manage their cash flow and meet their GST obligations with smaller manageable payments.
Additionally, the ATO observed from these small businesses that reporting and paying GST monthly better aligns with their reconciliation process and provides efficiency.
By moving these small businesses to a monthly reporting cycle, the ATO hopes that these businesses will be better placed to address their unmet GST obligations with a more manageable approach and not fall further behind. Simultaneously, this change also serves to demonstrate the ATO’s commitment to supporting compliant businesses while taking firmer action against non-compliant businesses that deliberately disregard their GST obligations.
How and when is the change being implemented?
From March 2025, the ATO will issue notices in writing to small businesses (and their tax agent) that are deemed to have a history of non-compliance regarding their new monthly reporting cycle, which take effect from 1 April 2025.
If the business has not responded to previous communications from the ATO and has demonstrated one of the following acts of GST non-compliance, it may be at risk of receiving the notice from the ATO:
- paying late or not paying the amount due
- not lodging or lodging late
- reporting tax obligations incorrectly
The transition to GST reporting cycles will remain in place for a minimum of 12 months, as part of the ATO’s ‘Getting it right’ campaign.
Can the ATO’s decision be reviewed?
If a business receives written notice from the ATO and disagrees with the ATO’s decision, the business can lodge an objection for the decision to be reviewed within 60 days from the date the decision was given. If the business is successful in the objection, it will remain on a quarterly reporting and payment cycle
What does this mean for you?
If you are a small business with a history of non-GST compliance based on the above examples, you should assess your business needs and consider whether it may be more beneficial to remain on quarterly GST reporting or transition into monthly GST reporting. If remaining on quarterly GST reporting would be optimal for your business needs, it is advised that you rectify any GST non-compliance as soon as possible before you are notified by the ATO.
If your business has been notified by the ATO to transition into monthly GST reporting, or anticipate that your business will be notified, please get in touch with Grant Thornton’s indirect tax experts who are able to assist.
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