Top 10 Mistakes New Business Owners Make in Australia (And How to Avoid Them)
Starting a business in Australia is exciting. However, many new owners make simple mistakes that can lead to serious problems down the line. These errors can result in cash-flow issues, tax penalties, BAS delays, and even business failure.
The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) reports that around 1 in 3 businesses fail within the first three years. This often happens due to poor planning or not following the rules.
This guide covers the top 10 mistakes new business owners make and how to avoid them.
This advice is relevant for small businesses in Adelaide, Melbourne, Sydney, Perth, Brisbane, Darwin, Canberra, and Tasmania.
1. Not Choosing the Right Business Structure
One of the biggest mistakes is picking the wrong structure, such as a sole trader, partnership, company, or trust. Different structures affect:
– how much tax you pay,
– your personal liability,
– your reporting duties.
For example, companies offer limited liability, while sole traders do not.
How to avoid it: Talk to a registered tax agent before registering. ATO data shows that thousands of business owners change their structure later, which costs time and money.
2. Not Registering for an ABN Correctly
Many new owners apply for an ABN without understanding ATO rules. The Australian Business Register rejects tens of thousands of ABN applications every year because applicants:
– do not show they are starting a real business
– give incorrect details
– choose the wrong business activity
How to avoid it:
Use a tax agent to lodge your ABN to ensure accuracy and fast approval.
3. Ignoring GST Registration Rules
Many small businesses do not know when they need to register for GST. ATO law says you must register for GST once you earn $75,000 or more per year. Not registering on time can lead to backdated GST, penalties, and interest charges.
How to avoid it:
Monitor your income monthly and register early if you expect to exceed the $75,000 threshold.
4. Mixing Personal and Business Expenses
Many new owners use one bank account for everything. This creates confusion in bookkeeping and makes BAS and tax reporting more difficult. It also raises the risk of audits.
How to avoid it: Open a separate business bank account from day one. This keeps your records organized and makes tax time easier.
5. Poor Bookkeeping or No Bookkeeping at All
The ATO states that most BAS errors arise from poor bookkeeping. Common mistakes include:
– claiming GST on items that don’t have GST
– missing key expenses
– incorrect income reporting
These mistakes can result in penalties and ATO reviews.
To avoid them, use Xero or QuickBooks and collaborate with a bookkeeper. Keeping accurate records reduces stress and protects your business.
6. Missing BAS and ATO Deadlines
Small businesses often miss deadlines because they do not understand reporting dates. When you lodge late, the ATO can charge failure-to-lodge penalties, interest charges, and audit flags.
In 2023, the ATO charged millions in late lodgement penalties for small businesses.
To avoid this, hire a BAS agent. BAS agents receive extended lodgement deadlines and ensure submissions are correct.
7. Not Understanding Tax Deductions
Many new business owners make mistakes with deductions.
They often overclaim deductions.
They sometimes underclaim deductions.
They also claim expenses incorrectly.
The ATO audits thousands of small business tax returns each year because of these mistakes.
To avoid this, learn what counts as a business expense and keep your receipts.
A better option is to have a tax agent prepare your return.
8. Not Planning for Cash Flow
The Australian Bureau of Statistics says that cash-flow problems are a big reason businesses fail. New owners often overlook several costs, including:
– tax bills
– supplier costs
– quiet months
– late client payments
To avoid these issues, create a simple cash-flow plan. Review it monthly with your accountant.
9. Using a Home Address for the Company
Many new company owners use their home address as the registered office. This puts their private details on ASIC’s public record. Problems include:
– loss of privacy
– receiving ASIC mail late
– risk of missing legal notices
How to avoid it:
Use a Registered Office Address Service from AMA Accountants. It keeps your home off public records and ensures you never miss ASIC mail.
10. Trying to Do Everything Alone
Many new business owners try to manage tax, BAS, payroll, compliance, and bookkeeping on their own. This often results in mistakes that can be costly later on.
How to avoid it:
– Work with qualified experts:
– registered tax agents
– BAS agents
– accountants
– business advisors
Businesses that seek professional support are more stable and grow faster.
Final Advice
Starting a business in Australia is easier if you avoid these common mistakes. Good planning, proper setup, and expert guidance lower stress and cut the risk of penalties. AMA Accountants helps new business owners in Adelaide, Melbourne, Perth, Sydney, Brisbane, Canberra, Darwin, and Tasmania start strong and stay compliant.
📞 +61 (0)420 529 890
📧 finance@amaaccountant.com.au
Authored By Amit Chugh
Partner, CPA & Registered Tax Agent
Your Trusted Accountant for Adelaide, Melbourne, Sydney, Brisbane & Across Australia
Amit Chugh is a Partner at The AMA Accountant and a highly respected CPA & Registered Tax Agent with a proven track record of delivering exceptional accounting and taxation services to individuals, businesses, and corporations across Australia.
Amit Chugh is a Partner at The AMA Accountant and a highly respected CPA & Registered Tax Agent with a proven track record of delivering exceptional accounting and taxation services to individuals, businesses, and corporations across Australia.
With over 25+ of professional experience, Amit has helped thousands of clients streamline their finances, optimise tax returns, and ensure full compliance with Australian Taxation Office (ATO) requirements. His client base spans Melbourne, Brisbane, Sydney, Tasmania, Perth, Adelaide, Darwin, Canberra, and regional hubs including Prospect, Modbury, Mawson Lakes, Woodville, Mount Gambier, Victor Harbor, Whyalla, Port Lincoln, Murray Bridge, Port Augusta, Gawler, and Port Pirie.
