Why Most ABN Holders Get Their First Tax Season Wrong

Most people think getting an ABN is the hard part. You register, start invoicing, money lands in your account and it feels like business is underway. Then tax season arrives — and that’s when many first-time ABN holders realise they misunderstood how the system actually works.

The problem usually isn’t tax rates or deductions. It’s expectations.

Many new ABN holders assume their tax return will work like a normal salary return. It doesn’t. The moment you earn income under an ABN, the ATO views you as running a business — even if it’s part-time, casual, or just getting started. That changes how income is assessed, how expenses are viewed, and how closely the numbers are checked.

One of the biggest mistakes is focusing only on profit. ABN holders often track what they “made” but overlook how the ATO looks at gross income first, then expenses. When income doesn’t line up with bank activity or reported figures, that’s when questions begin.

Record keeping is another blind spot. Many ABN holders wait until tax time to sort things out, only to find receipts missing, transactions unclear, or expenses mixed with personal spending. Trying to reconstruct a year’s worth of activity under pressure is where errors creep in — and those errors tend to follow you into future years.

Expense claims also catch people out. Claiming business costs isn’t about including everything that feels work-related. The ATO looks for consistency and proportionality. When expenses spike without a clear business story behind them, it raises attention — especially in the first year.

Then there’s tax shock. Because no tax is withheld during the year, many first-time ABN holders underestimate their first tax bill. It’s not uncommon for people to be caught off guard simply because nothing was set aside along the way.

Finally, there’s the assumption that mistakes can be fixed later. In reality, a poorly structured first year often rolls forward — income categories stay wrong, records don’t improve, and corrections become harder the longer they’re delayed.

Getting your first ABN tax return right isn’t about complexity. It’s about understanding how the ATO actually sees your activity from day one.

If you’re earning income under an ABN, your tax return isn’t just paperwork — it’s a reflection of how your business operates.

Learn how self-employed tax returns work here:
https://www.gotax.com.au/self-employed-tax-return