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ATO's New GST Rule: Non-Compliant Small Businesses Must Report Monthly

· 4 min read
Myaccountant Team

The ATO has stepped up its compliance approach to GST by requiring certain non-compliant small businesses to switch from quarterly to monthly GST reporting. For affected businesses, this change means more frequent lodgement obligations, tighter deadlines, and less room for error.

What Has Changed​

Historically, small businesses with a GST turnover under $20 million have been entitled to report GST on a quarterly basis, with Business Activity Statements (BAS) due 28 days after the end of each quarter. This remains the default for businesses that meet their obligations on time.

However, the ATO now has the power — and the willingness — to move non-compliant businesses to monthly GST reporting. This means affected businesses must lodge a BAS every month, with the same 21-day lodgement deadline that applies to large businesses reporting monthly.

Who Is Affected​

The ATO is targeting businesses with a history of non-compliance, including those that have consistently lodged BAS returns late, have outstanding GST debts, have failed to lodge one or more BAS returns, or have been subject to ATO compliance action for GST-related issues.

The move to monthly reporting is not automatic. The ATO issues a formal notice to affected businesses, advising them of the change and the date from which monthly reporting begins. Once a business is moved to monthly reporting, it cannot revert to quarterly reporting without ATO approval.

Why the ATO Is Doing This​

The rationale is straightforward: more frequent reporting gives the ATO greater visibility over a business's GST position and reduces the size of any potential debt that can accumulate between lodgements.

Under quarterly reporting, a business that fails to lodge can accumulate up to three months of unreported GST before the ATO is aware of the issue. Monthly reporting reduces that window to one month, allowing the ATO to intervene earlier and limiting the total debt exposure.

The ATO has also noted that monthly reporting can help businesses stay on top of their obligations by creating a regular discipline around GST reconciliation and payment.

The Practical Impact​

For small businesses accustomed to quarterly BAS lodgement, the shift to monthly reporting creates a significant increase in administrative workload. Key impacts include:

  • More frequent reconciliation. GST accounts must be reconciled every month rather than every quarter. This requires more regular attention to bookkeeping and record keeping.
  • Tighter cash flow management. Monthly GST payments leave less time to manage cash flow between lodgements. Businesses need to ensure they have sufficient funds available each month to meet their GST liability.
  • Increased accounting costs. Businesses that rely on an external bookkeeper or accountant to prepare their BAS will likely see an increase in professional fees, as the work is now required twelve times per year rather than four.
  • Higher penalty risk. More frequent lodgement deadlines mean more opportunities to lodge late, triggering failure-to-lodge penalties.

What Affected Businesses Should Do​

If you receive a notice from the ATO requiring you to move to monthly reporting, take the following steps:

  1. Bring all outstanding BAS returns up to date. The fastest path back to quarterly reporting is demonstrating a sustained period of compliance.
  2. Set up a monthly reconciliation routine. Ensure your bookkeeping is completed promptly after the end of each month so your BAS can be lodged on time.
  3. Automate where possible. Accounting software that calculates GST automatically and pre-fills BAS data reduces the manual effort required for monthly lodgement.
  4. Manage cash flow proactively. Set aside GST collected from each sale as it is received, rather than waiting until the BAS is due.
  5. Engage your accountant early. Discuss the change with your adviser and agree on a process that ensures lodgement deadlines are met consistently.

The goal should be to return to quarterly reporting as soon as the ATO permits — and to avoid the compliance issues that triggered the change in the first place.