Being a sole trader offers the freedom to run your own business your way — but it also means you’re responsible for keeping your tax and super in check. While most sole traders work hard to stay compliant, the Australian Taxation Office (ATO) has highlighted some common mistakes that can lead to unnecessary headaches and even penalties at tax time.
Common Mistakes Sole Traders Make
According to the ATO, many errors come down to poor record-keeping and misunderstanding what can (and can’t) be claimed. Here are the key areas to watch out for:
- Failing to report all income – This includes side hustles, cash jobs, or payments in-kind. All income must be reported, no matter how small.
- Over-claiming expenses – You can only claim deductions for expenses that are directly related to your business. Mixing personal and business costs is a common trap for many sole traders.
- Inaccurate record-keeping – Without proper records, it’s difficult to substantiate claims if the ATO asks for proof.
- GST registration errors – If your business turnover reaches the GST threshold, or you’re in industries such as ridesharing or taxi services, you must register for GST.
How to Stay on Top of Your Records
The ATO recommends using the myDeductions tool in the ATO app. This handy feature lets you record your income and expenses throughout the year — saving you time and stress when it’s time to lodge your tax return.
This tool is especially helpful if you:
- Work from home and claim home-based business costs
- Use your vehicle for business travel
- Have both business and personal use for certain expenses (just make sure to claim only the business portion)
Why Good Record-Keeping Matters
Accurate records don’t just make tax time easier — they protect you in case the ATO asks for verification. Clear, organised records also help you understand your business performance and make better financial decisions.
Final Thoughts
Staying compliant as a sole trader doesn’t have to be complicated. With the right tools and discipline in keeping accurate records, you can focus more on running your business and less on worrying about tax issues.
At Sunny Finance, we can help you stay informed and organised so you avoid these common pitfalls. Get in touch with us if you need guidance on managing your business finances or preparing for tax time.
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