The ATO is Smarter and Faster Than Ever Before

With AI and advanced data-matching tools that scan millions of records in seconds, GST claims, payroll data, superannuation payments, and even third-party transactions, are all being digitally cross-checked and matched by ATO technology. If something doesn’t add up, it’s flagged immediately for investigation.

But this isn’t just about collecting more tax. There’s an urban myth that some business owners can ‘get away with paying less tax’ or ‘know how to play the system,’ and the ATO is under pressure to make sure everyone pays their share. The ATO has been given more power to investigate, collect records, and issue penalties when things don’t stack up. Technology is simply making it all happen faster.

Key Areas Under the Microscope

So what areas are the ATO looking at most closely? Well… anywhere there’s risk or history of mistakes. Right now, these are the common areas under scrutiny:

GST Reporting:

When it comes to GST, the ATO’s smart systems compare records with third parties, including bank records, online platforms and payment systems. They check this information with reported sales on your Business Activity Statements and Tax Returns, effectively checking for GST compliance by identifying discrepancies and under-reporting income. lf your numbers don’t line up, or if your claims seem out of step with industry averages, you’ll likely hear from them. These aren’t random checks – they’re targeted at businesses being flagged through data matching.

Payday Super is coming – Be Prepared:

Payday Super is set to become law in July 2026. You already report wages and salaries to pay PAYG in real-time, and this year Superannuation will be the same. Late or missing super payments will be automatically flagged. The ATO will be able to spot issues and act quickly. Businesses are expected to pay super on time, every time.

A few things to consider and prepare for when considering this change:

The ATO Super Clearing House will be closed from 1st July 2026. You will not be able to pay Super via this facility as you may have done in the past. Super payment will be via an alternate Clearing House, or directly from your accounting software.

If you are paying from Xero Auto Super (or other accounting software with a similar facility), you will need a valid bank feed connected to your software. It can take a couple of weeks to get some bank feeds established, so give yourself plenty of time to organise this, and make sure everything is linked correctly to process your ‘auto super’ on time.

Payroll Compliance:

Wage underpayments, missing records or wrongly classified staff are becoming easier for the ATO to detect. AI-driven and third party cross-checks compare your payroll data to other sources; if there’s a mismatch, expect a follow-up. Other than the standard payroll checks, the ATO are looking to ensure compliance with casual conversion (the right of employees to request a permanent position), as well as ‘pay point progression,’ where over time, employees should progress through Award levels. Note: You cannot leave an employee on Level 1 of the award forever, assuming it’s ok to pay them ‘minimum wage.’ Employees are expected to ‘progress’ through the Award levels in accordance with the Award policy.

This area of business has been impacted by the Federal Court ruling in the case of The Fair Work Ombudsman vs. Woolworths.

You can read more about it in our blog: https://www.westbas.com.au/news/annualised-salaries-are-out-what-small-businesses-need-to-know/

Data Privacy and Security:

With more and more data being collected, businesses have a responsibility to keep their data safe. The ATO expects you to have secure systems for storing and protecting sensitive information. A data breach or sloppy record-keeping can trigger a compliance review and potentially lead to fines.

Industry Benchmarks:

The ATO uses industry data to spot inconsistencies. If your business reports figures that are way out of step with similar businesses, expect a ‘red flag.’ This doesn’t mean every anomaly is a problem, but you’ll need to be ready with fully backed-up well-prepared information, covering your systems, processes and financial data.

Why the Stricter Approach?

The ATO’s focus on fairness and transparency is stronger than ever. Businesses that make honest mistakes are given a chance to fix them, but those who ignore the rules face swift penalties. The use of AI and data-matching means the ATO can enforce the law more consistently, and new laws back them up with stronger investigative powers.

How to Stay Compliant (and Sleep at Night)

It’s no longer ok to ‘wing it’ when it comes to compliance. Your business must have standard operating policies and procedures that adhere to the strict guidelines now in place. Here’s how to keep your business in the clear:

Keep records up to date and accurate, especially for payroll, super and GST. If you can’t easily produce the required information, you’re exposed.

Double-check your reporting before you submit. Reconcile accounts, fix errors and don’t rely on memory or guesswork.

Meet every deadline. Late filings and payments are more obvious than ever. Even a small delay can trigger questions.

Protect sensitive data. Use secure systems, train your staff and don’t take shortcuts with privacy.

Stay across the latest rules and requirements. The ATO’s website is updated regularly, so make it a habit to check in.

If you spot a problem, fix it early. Voluntary disclosure is always better than being caught out.

Remember, the ATO isn’t just getting smarter, they’re getting faster, more thorough and less forgiving of mistakes. For business owners, that means compliance needs to be part of your everyday routine. The risks of getting it wrong are high and include audits, penalties and reputational damage. But the rewards for getting it right are just as real - peace of mind, fewer disruptions, and the confidence that comes from knowing your business can stand up to scrutiny.

At WestBAS, we use Xbert, an add-on app that works in line with Xero. Xbert alerts us if we have an incorrect or unregistered supplier ABN. It informs us if incorrect GST is being calculated. This app means we can support our clients, even more, by:

Improving data quality

Consistently detecting errors

Spotting ‘red flag’ areas that need further attention

The rules have changed. If you’re unsure about any aspect of compliance, now’s the time to seek advice. Reach out to us for sound advice and recommendations when you need it.