{"id":5568,"date":"2026-04-30T08:15:08","date_gmt":"2026-04-30T08:15:08","guid":{"rendered":"https:\/\/www.whizconsulting.net\/au\/?p=5568"},"modified":"2026-04-30T08:28:52","modified_gmt":"2026-04-30T08:28:52","slug":"eofy-accounting-mistakes-ato-scrutiny","status":"publish","type":"post","link":"https:\/\/www.whizconsulting.net\/au\/blog\/eofy-accounting-mistakes-ato-scrutiny\/","title":{"rendered":"7 Year End Accounting Mistakes that trigger ATO Scrutiny in FY 2025-26"},"content":{"rendered":"

Most ATO reviews don\u2019t begin with fraud. They begin with a number that doesn\u2019t match. As EOFY approaches, the Australian Taxation Office has become one of the most data-sophisticated tax authorities globally. With real-time Single Touch Payroll feeds, automated BAS cross-checks, and bank data matching, discrepancies that once went unnoticed are now flagged within weeks\u2014sometimes days.<\/p>\n

The businesses that come under scrutiny are rarely acting deliberately. More often, it\u2019s rushed EOFY closing, missed reconciliations, or small classification errors that build up over time. As 30 June nears, the difference between a clean set of accounts and an ATO review often comes down to a few specific, avoidable mistakes. Below are seven of the most common\u2014and how to fix them before EOFY closes.<\/p>\n\t

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Be Year-End Ready<\/h3>\r\n

Stay compliant, stress less, and close with confidence.<\/p>\r\n\t\t<\/div>\r\n

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Mistake 1: Bad Debts Not Written Off Before 30 June<\/h2>\n

Bad debts are only deductible when they are formally written off before the end of the financial year. Identifying a debt as unrecoverable is not enough. It must be recorded in the accounts within the same financial year. If this step is missed, the deduction is deferred, and in some cases, disallowed.<\/p>\n

Why it triggers scrutiny<\/strong>
\nThe ATO examines the timing of income recognition and subsequent write-offs. If a deduction is claimed without a corresponding write-off entry dated before 30 June, it creates a mismatch.<\/p>\n

Example<\/strong>
\nA business raises an invoice of $20,000 in December 2025 and reports it as income. By June 2026, the customer has not paid, and recovery attempts have failed. However, the business delays writing off the debt until July 2026. In this case, the bad debt deduction cannot be claimed for FY 2025\u201326.<\/p>\n

What to do<\/strong><\/p>\n

    \n
  • Review outstanding receivables before year-end<\/li>\n
  • Document recovery attempts (calls, emails, formal demand letters)<\/li>\n
  • Pass formal write-off entries before 30th June<\/li>\n<\/ul>\n

    Mistake 2: Incorrect GST Coding<\/h2>\n

    GST errors are one of the most common reasons businesses come under ATO review. Incorrect coding affects Business Activity Statements and can lead to over-claimed credits or under-reported liabilities.<\/p>\n

    Why it triggers scrutiny<\/strong>
    \nThe ATO compares GST reported in BAS with underlying transaction data. Inconsistent patterns, especially repeated errors, raise compliance concerns.<\/p>\n

    Common issues<\/strong><\/p>\n

      \n
    • Claiming GST on expenses that are input-taxed or GST-free<\/li>\n
    • Misclassifying taxable and non-taxable sales<\/li>\n
    • Claiming input tax credits without valid tax invoices<\/li>\n<\/ul>\n

      Example<\/strong>
      \nA business claims GST credits on bank charges and interest expenses. These items do not include GST, resulting in inflated input tax credits.<\/p>\n

      What to do<\/strong><\/p>\n

        \n
      • Run a GST coding audit across your chart of accounts<\/li>\n
      • Verify that high-volume expense categories are correctly mapped in your accounting system<\/li>\n
      • Ensure every input tax credit claim is backed by a valid tax invoice dated in the correct period<\/li>\n
      • Conduct periodic GST reviews, ensure accurate tax code mapping in accounting systems, and verify that all claims are supported by valid documentation.<\/li>\n<\/ul>\n

        Mistake 3: STP Figures Not Matching Payroll Records<\/h2>\n

        Single Touch Payroll has made payroll discrepancies visible in real time. There is no longer anywhere to hide a mismatch. Since STP became mandatory, the ATO receives payroll data \u2014 wages, PAYG withholding, and superannuation \u2014 each time you process a pay run. That data is then cross-referenced against your financial statements and BAS lodgements.<\/p>\n

        Why it triggers scrutiny<\/strong>
        \nDifferences between STP submissions, payroll reports, and financial statements indicate reporting inaccuracies. These inconsistencies often lead to further investigation.<\/p>\n

        Common mismatches<\/strong><\/p>\n

          \n
        • PAYG withholding discrepancies<\/li>\n
        • Superannuation not aligned with reported wages<\/li>\n
        • Incorrect year-end STP finalisation<\/li>\n<\/ul>\n

          Example<\/strong>
          \nA company\u2019s financial statements show total wages of $520,000, while STP reports only $495,000. This gap signals incomplete or incorrect reporting.<\/p>\n

          What to do<\/strong><\/p>\n

            \n
          • Reconcile STP submissions to your payroll records and general ledger before finalisation<\/li>\n
          • Confirm superannuation accruals are correctly recorded and align with actual contributions<\/li>\n
          • Complete STP year-end finalisation accurately<\/li>\n<\/ul>\n

            Mistake 4: Personal Expenses Claimed as Business Costs<\/h2>\n

            Blurring the line between personal and business expenses is a common EOFY issue, especially in closely held businesses.<\/p>\n

            Why it triggers scrutiny<\/strong>
            \nThe Australian Taxation Office uses data matching and behavioural analysis to flag expenses that don\u2019t align with business activity. Repeated misclassification increases the risk of audits and penalties.<\/p>\n

            Common examples<\/strong><\/p>\n

              \n
            • Personal travel recorded as business travel<\/li>\n
            • Private vehicle expenses claimed without proper logbooks<\/li>\n
            • Household costs included as business expenses<\/li>\n<\/ul>\n

              Example<\/strong>
              \nA director claims family holiday expenses as a business deduction without demonstrating a clear business purpose. These claims are typically disallowed and may attract penalties.<\/p>\n

              What to do<\/strong><\/p>\n

                \n
              • Clearly separate personal and business expenses using dedicated business accounts and cards<\/li>\n
              • Maintain a compliant logbook for any vehicle-related claims<\/li>\n
              • Document the business purpose for all travel and entertainment expenses<\/li>\n
              • Apportion home and mixed-use expenses accurately, based on actual business usage<\/li>\n
              • Review expense classifications regularly before EOFY to catch and correct errors early<\/li>\n<\/ul>\n \r\n
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                Hire A Dedicated Accountant Who:<\/h3> \r\n\t
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                Prepares Accurate IRS Tax Teturns<\/div><\/div>