5 Common Tax Mistakes to Avoid

Here are five of the most common mistakes I see — and how to avoid them.

1. Registering for GST too late

The GST threshold is $75,000 in gross income — not profit. Many new business owners make the mistake of thinking, “I only made $20,000 profit, so I don’t need to register.” Wrong. The $75,000 threshold is based on total sales (before expenses).

If you don’t register on time, you may end up having to pay backdated GST out of your own pocket, plus penalties and interest.

For example, if you hit $80,000 in sales in your first year but didn’t register, the ATO can require you to go back and pay GST on all sales over $75,000.

Tip: Keep an eye on your running sales total, not just profit. If you’re close to the threshold, it’s best to register early and start adding GST to your invoices.

2. Not keeping a proper logbook & misinformation about the km method

If you use a car for work and personal purposes, the ATO wants records. Without them, your claim may be severely limited.

There are two main methods for claiming car expenses:

• Cents per km method (up to 5,000 km per year, based on business use only).

• Logbook method (requires a 12-week logbook, but lets you claim an actual percentage of running costs like fuel, rego, insurance, and servicing).

  
  

The logbook gives you the best deduction if you genuinely use the car a lot for work, but it requires more discipline. Rules also differ depending on the vehicle — for example, some utes and vans have different rules compared to passenger cars.

Tip: Use an app like ATO’s myDeductions or simply keep a notebook in the glovebox. Once you’ve done the 12 weeks, the logbook is valid for 5 years (as long as your usage doesn’t change dramatically).

🚗 Myth: “You automatically get 5,000 km as a deduction each year.”

This is one of the most common misconceptions I hear. People think the ATO just hands out 5,000 km as a freebie.

✅ Reality:

The cents-per-km method allows you to claim up to 5,000 km per year, but it’s not automatic.

• You must be able to show a reasonable basis for your claim.

• That might mean diary notes, records of client visits, or a calculation of typical trips (e.g. 3 times a week × 20 km round trip × 48 weeks = 2,880 km).

• If you drive less than 5,000 km for work, you can only claim the amount you actually travelled.

  
  

So, if you only did 1,000 km of genuine business travel, your claim is limited to that. You don’t just “get” the full 5,000 km by default.

3. Paying employee super late

Employee super isn’t optional, and it must be paid by the quarterly due dates (28th of the month after each quarter). Many businesses think, “I’ll just pay it late, no big deal.”

But here’s the catch — late super is not deductible.

Example: If you owe $5,000 in super and pay it late, you not only lose the deduction (so your taxable income is $5,000 higher), but you may also need to lodge a Superannuation Guarantee Charge (SGC) statement and pay penalties.

Tip: Set reminders or set up automated clearing house payments so super is always processed on time. A couple of days late can cost you hundreds in lost deductions.

Mistake 4: Mixing personal and business spending

It might feel convenient to just “put everything on the business card” and sort it out later, but this is one of the most common mistakes business owners make.

When personal and business spending is jumbled together, it:

• Makes bookkeeping messy and time-consuming.

• Increases the risk of missing deductions or overstating expenses.

  
  

For example, buying groceries, kids’ school fees, or personal holidays on the business account doesn’t magically make them deductible.

Tip:

• Keep a dedicated business account (and ideally a business credit card).

• If you accidentally use the business account for something personal, flag it quickly in your software (Xero, MYOB, etc.) and code it to Owner’s Drawings or Personal Expenses.

• Think of your business bank account as “hands off” for personal spending — it’ll save you headaches at tax time.

5. Jumping into the wrong business structure

Business structures aren’t one-size-fits-all. Sole traders, companies, and trusts all have different tax rules, responsibilities, and costs.

For example:

• Sole trader: Simple, cheaper, taxed at personal rates — but no asset protection.

• Company: Flat 25% company tax rate, but profits drawn out are taxed again (dividends). More reporting/admin costs.

• Trust: Flexible distribution to beneficiaries, but more complex compliance.

  
  

Tip: Always get advice before changing your structure. The “best” option depends on your income level, industry, risk, and future goals.

⚖️ Disclaimer: The information in this blog is general in nature and is not personal tax advice. Everyone’s circumstances are different — before making decisions, seek advice from a registered tax agent or qualified professional.