The ATO’s compliance priorities evolve each year. Here are the key areas of focus taxpayers and businesses need to be aware of heading into the new financial year.
Each year, the ATO publishes its compliance priorities and announces the specific areas it will be targeting in its audit and review activities. Staying informed about these priorities, and ensuring your tax affairs are in order in relation to them, is one of the most practical steps any taxpayer or business can take to reduce their ATO risk.
This article outlines the key ATO compliance focus areas heading into the new financial year and explains what taxpayers and businesses should be doing to manage their exposure.
Offshore income and foreign assets continue to be among the ATO’s highest compliance priorities. The expansion of the Common Reporting Standard (CRS) network and the ATO’s growing data analytics capabilities mean that the ATO has more information about Australians’ overseas financial interests than ever before.
The ATO’s offshore compliance work is focused particularly on: undisclosed foreign bank accounts and investment accounts; unreported foreign income from employment, business, or investments; foreign trust arrangements; and transfers of significant sums into Australia from overseas sources that have not been explained.
Taxpayers who have offshore interests that are not fully disclosed to the ATO should seek advice on the voluntary disclosure process as a matter of urgency.
Following the ATO’s release of its guidance on Section 100A in 2022 and subsequent litigation outcomes, the ATO’s scrutiny of discretionary trust distributions continues at a high level. That focus has only sharpened following the High Court’s decision in Commissioner of Taxation v Bendel [2026] HCA 18: with unpaid present entitlements no longer treated as Division 7A loans, the ATO has expressly flagged Section 100A and Subdivision EA as its remaining integrity tools for trust arrangements involving corporate beneficiaries. Trustees who make distributions to family members with low marginal tax rates, particularly where the economic benefit of the distribution does not genuinely flow to that beneficiary, remain at significant risk.
All trustees should review their distribution history and current arrangements with their tax adviser in light of the ATO’s current position. Where existing arrangements carry Section 100A risk, addressing them proactively rather than waiting for an audit is strongly advisable.
Rental property tax claims continue to be a significant area of ATO compliance activity, particularly following the ATO’s findings that a large proportion of rental property tax returns contain errors, mostly in the direction of overclaiming.
Common areas of error include: claiming the full cost of repairs that should be treated as capital improvements; failing to apportion deductions for properties that are available for rent for only part of the year or that are used partly for private purposes; and incorrectly claiming interest deductions for loans with private purposes.
Although interest rates have eased from their recent peaks, interest deductions on rental properties remain very large, and the ATO’s attention to this area remains correspondingly heightened.
Work-related expense claims remain among the most common sources of ATO compliance activity for individual taxpayers. The ATO uses data analytics to identify taxpayers whose claims appear unusually high relative to their occupation and income level.
With the ongoing normalisation of working from home, home office expense claims continue to attract ATO attention. Taxpayers claiming home office expenses should ensure they are using a recognised method (such as the fixed rate of 70 cents per hour, which requires a contemporaneous record of hours worked from home), keeping appropriate records, and not overclaiming by including expenses that relate to private use.
If you are in any doubt about whether your work-related expense claims are correctly stated, reviewing them with a tax adviser before lodgement, or making an amendment where overclaiming has occurred, is prudent.
From 1 July 2026, the superannuation guarantee regime has changed fundamentally. Under payday super, employers must pay superannuation at the same time as salary and wages, with contributions required to reach employees’ funds within 7 business days of each payday. The quarterly payment cycle that businesses have long built their cash flow around no longer applies.
Employers whose payroll systems and cash flow practices have not been updated for payday super face an elevated risk of superannuation guarantee charge exposure, and the SGC is not deductible. With general interest charge also no longer deductible for amounts incurred from 1 July 2025, the after-tax cost of falling behind on employer obligations has never been higher. Reviewing payroll compliance early in the new financial year is strongly advisable.
The ATO’s data-matching programme continues to expand, with increasing volumes of financial data being shared between financial institutions, government agencies, and the ATO. For cash-intensive businesses, the risk of being identified as an outlier through benchmark analysis or third-party data has never been higher.
The ATO is particularly focused on small businesses in the hospitality, construction, and personal services sectors. Businesses in these sectors should ensure their record-keeping and reporting is thorough and consistent with industry benchmarks.
Related guides: Holiday home rental deductions being targeted; Tax obligations arise from sharing economy; ATO Data Matching: Property Management and Rental Bonds.
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