Launching a business feels like a wild ride—one minute you’re fired up by ideas, the next you’re buried under a pile of rules and paperwork. Here’s the curveball: do you actually need to file taxes in your first year? Don’t believe the myth that new businesses can “skip” their first tax return. Whether you’ve just opened a tiny home bakery or registered your digital agency, the Australian Taxation Office (ATO) has its eyes on you from the start. If you miss the essentials, you could face penalties, lose out on tax benefits, or mess up your record-keeping for years to come. There are absolutely no free passes for the first year—you have to file if you’re carrying on a business, made any income, or even if you started halfway through the financial year.
Do New Businesses Have to File Taxes? The Straight Facts
Let’s tackle the big question head-on. The rule in Australia is simple: if you run a business—sole trader, partnership, or company—you have reporting obligations, and that usually means lodging a tax return each financial year. There’s no magical first-year exception. Even if your business made zero profit or accidentally ran at a loss, skipping the tax return is not an option. The ATO’s definition of “carrying on a business” is broad. If you’re aiming to make a profit and running things in a businesslike way (advertising, invoicing, keeping records), you’re on the hook.
Here’s the deal for each structure:
- Sole traders: You have to lodge a personal tax return with a business and professional items schedule, regardless of income.
- Partnerships: The partnership lodges a return to inform the ATO about profits or losses, but each partner also reports their share on their own return.
- Companies: Registered companies must file—no ifs, no buts—even if nothing happened after registration. Company tax is separate from your personal return.
If you registered for an Australian Business Number (ABN), that’s all the red flag the ATO needs to expect regular reporting. For GST—if your turnover is $75,000 or more, or you provide taxi or ride-share services, you need to register and lodge BAS (Business Activity Statements) as well—that’s on top of your annual return.
Here’s a handy table to summarise what’s required:
| Business Structure | First Year Tax Return Needed? | Additional Forms |
|---|---|---|
| Sole Trader | Yes | Personal return + business schedule |
| Partnership | Yes | Partnership return + individual returns |
| Company | Yes | Company tax return, may include BAS |
Even if you started trading in May and closed again in June, you still must declare it. If you only registered the ABN and did nothing else, you might be able to mark “no income” on the form—but the form still needs to go in. Trying to dodge this step creates headaches later—think ATO letters, late penalties, and issues if you ever need finance or government grants.
The Nitty-Gritty: What Income Do You Need to Declare?
Sorting what counts as business income is where people trip up. It’s not just the cash you banked—every cent counts. You must declare all sales, whether paid in cash, bank transfer, or even through barter. Got a gig on Fiverr or Uber? Yes, that’s income too. Even if you haven’t been paid yet but have invoiced clients, you’ll need to report those amounts if you use accrual accounting. If you run things on a cash basis, only money actually received before 30 June gets counted for this financial year.
Besides sales, include any:
- Bank interest earned on business accounts
- PayPal or Stripe credits
- Insurance payouts, government grants, or COVID-19 support (remember JobKeeper?)
- Other business-related revenue, such as commissions or affiliate income
This is where good record-keeping from day one pays off. I’ve seen first-hand how messy Excel sheets or lost receipts can knock you out at tax time. The ATO expects you to keep records for at least five years. Cloud accounting tools, like Xero or QuickBooks, practically run themselves after setup—trust me, they’re lifesavers.
Here’s a little-known tip: even if your business “invested” in assets (like laptops, tools, or fit-outs) and you claim the “instant asset write-off,” you still need to lodge. Claiming deductions or offsets (like the popular small business tax offset) is only possible if you file on time. The write-off limit changes—right now it swings around the $20,000 mark, but check the ATO’s current threshold each year—missing out on these boosts could cost you heaps.
People also forget to include “phantom” income, like barter deals. If you swapped web design for free coffee at the café down the street, you both need to declare the market value of what you received. Barter is income—it doesn’t matter if cash changed hands, the ATO wants its slice.
Tax Deductions and Traps for New Business Owners
Here’s where things get interesting. First-timers often leave money on the table by missing out on legal deductions—or stumble by trying to claim things which don’t qualify. The rules are strict. To claim a business expense, you need to prove that:
- The cost is directly tied to running your business—not personal use or private purposes.
- You have records—receipts, invoices, bank statements—to show what was spent.
- The expense wasn’t reimbursed by anyone else.
Some of the best first-year deductions can include:
- Website setup, branding, and logo design
- Business registration fees
- Marketing costs, such as Facebook ads or print flyers
- Equipment and software bought for the business
- Home office portions—if you work from your kitchen table, you may claim a share of power, internet, and rent
- Professional advice fees—tax agent, accountant, startup advisor
But, don’t fall for the classic traps: you can’t claim your groceries (unless you’re literally selling them as stock), you can’t claim the entire rent if you use just one room, and you definitely can’t write off your Bali holiday as a "business trip" unless you can legally prove it’s 100% work-related.
Another rookie tripwire: mixing your personal and business accounts. The ATO doesn’t chase up small mistakes, but if they audit you, unravelling a business from a personal transaction mess wastes your sanity. Open a dedicated account the moment you register.
A wild stat? About 27% of small businesses in Australia miss out on thousands in deductions because receipts get lost, or because they simply don’t know what’s allowed. If you’re not sure, a tax agent often finds enough savings to cover their fee anyway. Even for micro-businesses, it’s usually worth the spend the first year, just to set things up right.
Deadlines, Extensions, and Penalties: What Happens if You Don’t File?
A lot of new business owners never realise the ATO doesn’t send personal “tap-you-on-the-shoulder” reminders. Tax returns for businesses are due by 31 October each year for most sole traders and partnerships, covering all activities between 1 July of the previous year and 30 June of the current one. If you go through a registered tax agent, you might get more time—often until mid-May—but only if you’re on their books before 31 October. Companies have similar annual deadlines, but if you’re handling your own return, not using a tax agent, that 31 October date is golden. Miss it, and the countdown to penalties begins.
Penalties add up fast. The ATO issues a failure-to-lodge penalty, calculated at $313 for every 28 days your return is late (capped at $1,565 for individuals and small entities, as of July 2025). For those who keep ignoring the issue, interest can also score you a nice, fat bill—even if you didn’t owe tax to begin with. The damage isn’t just financial—your ABN may get flagged, government schemes (like grants or pandemic support) can get blocked, and it’ll be far tougher to win bank loans or investor support down the track if your records show “non-lodgment.”
Sometimes “doing nothing” is a legitimate option—say, your business never actually launched, earned no money, and has closed. In that case, you must notify the ATO and formally cancel your ABN and registration. This stops them chasing you each year for outstanding returns. Don’t just ghost the system—the ATO’s database is alarmingly efficient, and the longer you go, the bigger the tangle. If you’re stuck and overwhelmed, the smartest move is to call a tax agent or accountant—they know how to communicate with the ATO, negotiate late returns, and sometimes even arrange for penalties to be dropped if you have a good excuse (illness, floods, computer meltdown—the bigger the drama, the better).
Don’t wait for a letter, fine, or scary phone call. Filing on time is part of the trust you earn with the ATO—and believe me, once you’re in their good books, you’ll sleep easier every June and October.
