Business Update – September 2025: Inflation, ATO Guidance & Small Business Confidence

Business Update – September 2025: Inflation, ATO Guidance & Small Business Confidence

Spring is here, and while the Reserve Bank’s September 30 cash rate decision is set to dominate headlines, it’s not the only story businesses should be paying attention to. Costs are shifting, confidence is beginning to lift, and the Australian Taxation Office (ATO) has issued important guidance on company cars and sole trader tax traps.

This newsletter explores four key developments shaping the business landscape right now:

• ATO crackdown on company car use and the fringe benefits tax (FBT) implications
• Inflation rebound to 2.8% and the risk of further increases
• Business turnover surge in July, with signs of renewed optimism across industries
• ATO warning for sole traders on common tax mistakes

Let’s break down what each means for your business and how to prepare for the months ahead.

Company Car Crackdown: What the ATO Wants You to Know

Giving employees access to company cars can be a great way to reward loyalty, boost morale, and help with staff retention. However, there are hidden risks when vehicles are used outside of work hours. The ATO has reminded businesses that personal use of company vehicles may attract fringe benefits tax (FBT).

What Counts as Personal Use?

Many employers assume that occasional non-work use won’t be an issue. However, the ATO takes a broad view. Personal use can include:

• Weekend getaways or camping trips
• School drop-offs and pick-ups
• Grocery runs or errands
• Driving friends or family members
• Simply parking the car at home overnight

Even if the vehicle isn’t driven much outside of work, just having it available for personal use can trigger an FBT obligation.

Are There Any Exemptions?

Some vehicles can be exempt from FBT if:

• Private use is genuinely minimal
• The vehicle qualifies as a commercial vehicle (like certain utes or vans)
• Detailed records prove work-related use dominates

What Businesses Should Do

To remain compliant, the ATO advises:

• Check if exemptions apply to your vehicles
• Maintain accurate logbooks and odometer readings
• Calculate FBT liability correctly each year
• Lodge and pay FBT on time
• Report benefits on employees’ income statements

Key takeaway: Company car perks are valuable, but ignoring the FBT implications could lead to costly tax bills. Businesses should review policies now to avoid surprises.

Inflation Rebounds to 2.8% – Is It the Start of a Climb?

After several months of easing, inflation is back on the rise. The consumer price index (CPI) increased from 1.9% in June to 2.8% in July, returning inflation to the top of the RBA’s 2–3% target band.

Why Did Inflation Rebound?

Several factors are at play:

• Rising energy and fuel costs feeding into household and business budgets
• Global supply chain pressures pushing up import prices
• Stronger-than-expected consumer spending, supporting demand

What’s Next for Inflation?

Economists warn that inflation could increase further in the coming months. This is partly due to base effects: prices fell in August and October last year, so if prices rise this year, the annual inflation rate will automatically look higher.

What This Means for Businesses

• Financing costs may stay high longer: If inflation remains sticky, the RBA is unlikely to deliver further rate cuts soon.
• Cost pressures could rise again: Energy, wages, and imports may continue to push up expenses.
• Careful cost management is vital: Reviewing supplier contracts, utilities, and operational costs is increasingly important.

Tip: If you’re considering refinancing or restructuring business loans, now may be the time to explore options before inflation pressures worsen.

Business Turnover Surges in July: Signs of Recovery

After years of challenges, small businesses are finally seeing signs of renewed strength. According to the ABS, business turnover jumped 2.9% in July, the largest monthly increase in more than three years. Annual turnover growth is now 6.3%.

Industry Breakdown

• All 13 industries recorded growth in July
• All except mining also grew on an annual basis
• Sectors like hospitality, retail, and professional services are reporting stronger-than-expected demand

Rising Confidence in the Sector

The Small Business Pulse index, an initiative from the Australian Small Business Ombudsman, Bruce Billson, rose 0.6% in August. This is the second consecutive quarterly increase, signalling cautious optimism among business owners.

Mr Billson highlighted several trends driving this renewed confidence:

• Embracing technology to improve productivity and reduce admin workloads
• Expanding digital channels including e-commerce, social media, and AI-powered marketing
• Reassessing suppliers and contracts to manage costs more effectively
• Exploring financing solutions such as invoice factoring to smooth cash flow

Outlook: While challenges remain, the signs suggest small business resilience is growing. Those who adapt quickly to new technologies and financial strategies are well-placed to thrive.

Sole Traders: Watch Out for These Common Tax Traps

Tax compliance is often one of the biggest headaches for sole traders, especially when managing multiple income streams and expenses. The ATO has issued a reminder of common mistakes sole traders should avoid this year.

Frequent Errors Sole Traders Make

1. Not reporting all income: including side hustles, cash jobs, or in-kind payments (goods and services received for work)
2. Over-claiming expenses – such as personal portions of phone, internet, or vehicle costs
3. Incorrectly claiming business losses – including offsetting non-commercial business losses against other income
4. Misreporting personal services income – to gain unfair tax benefits
5. Failing to register for GST – particularly in ride-sourcing or taxi services, or if revenue exceeds the GST threshold
6. Poor record-keeping – missing receipts, incomplete logbooks, and inaccurate financial statements

ATO’s Message

“We know small businesses work hard to get their tax and super right, however we understand mistakes can still happen,” the ATO stated. Sole traders are urged to double-check returns, maintain records, and seek advice if unsure.

Tip: If you’re a sole trader, consider using accounting software or professional bookkeeping services to stay compliant and reduce stress during tax time.

Final Word: Staying Ahead This Spring

The business landscape this spring is defined by both challenges and opportunities:

• ATO compliance crackdowns remind us of the importance of accurate reporting
• Inflation’s rebound highlights the need for cost vigilance
• Strong turnover and improving confidence show small business resilience
• Sole traders must remain diligent with tax compliance to avoid penalties

Key takeaway: Staying proactive – from managing costs and compliance to adopting technology and reviewing finance – will be crucial in the months ahead.

If you’d like to discuss refinancing, business finance options, or compliance strategies tailored to your circumstances, talk to one of our experts.