The service sector contributes significantly to the Australian economy in terms of income, employment and business registrations. Businesses in the service sector provide more than three-quarters of the economy’s income and employ more than 87% of all Australian private sector employees. Further analysis suggests that small businesses make up a large part of the service sector. For example, small service sector businesses (SSSBs) account for $393 billion in income and employ 4,127,000 of the total service sector employment of 9,410,000. Considering the significance of SSSBs to the economy, it is important to investigate the factors that may influence their continued success. In Australia and throughout the world, research has highlighted that the tax compliance burden on small businesses can be explained by the extra time, the investment and the psychological costs. However, in terms of cash flow, research has suggested that Australian small business owners (SBOs) do not believe that taxation is particularly concerning. The findings emphasised that other business factors, including trading partners, competitive markets and cash flow management abilities were relevant to being able to pay the tax liability when it was due and payable. Although the previous wholesale sales tax (WST) did have some concerns for SBOs, more recent research into the goods and services tax (GST), also raised concerns about the ability to maintain a consistent cash flow as a result of complying with GST obligations. SBOs have been found to have difficulty implementing systematic cash flow management practices in their business and in the operation of computer accounting software (CAS) further than the basic recording of creditor and debtor invoicing. The research findings suggest that these limitations could create unfavourable consequences for small business survival, whereas recent research exploring taxation literacy of individuals found that participants involved in operating a small business have higher levels of tax knowledge than other participants. Broadly, comparison of these findings could suggest that although SBOs have higher levels of taxation literacy than individuals, their ability to use and understand CAS and to implement effective cash flow management strategies can cause negative consequences for business survival. Considering business success is heavily dependent on cash flow and taking the findings of the GST and tax literacy research into consideration, this research explores the impact of taxation and SBO literacy on cash flow. The tax systems explored in the research include the GST, fringe benefits tax (FBT), income tax, pay as you go (PAYG) withholding, and superannuation guarantee (SG). The scope of SBO literacy covered by this research includes two components of professional financial literacy: the ability to implement effective cash flow management practices and the use and understanding of financial statements, as well as the use and understanding of CAS, and the understanding of business taxation. This research adopts a mixed methods approach, combining three separate interrelated stages: a multiple case study and engagement of experts in the qualitative stage, and a large-scale survey for the quantitative stage. The qualitative findings were used as an informer for the creation of the large-scale survey instrument implemented in the quantitative phase. Overall, the research findings suggest that, regardless of the tax system, SBOs believe that taxation has minor consequences for small business cash flow. The research outcomes identified that some components of tax administration can create cash flow constraints including the requirement to comply with multiple tax systems, rather than being related to the obligation to pay the tax liability. In contrast, the results obtained when exploring the influence of SBO literacy on cash flow stability suggest that SBOs may not have a level of literacy that supports the management of cash flow. Although SBOs were found to have a mean literacy of 67% for the understanding of financial statements and 55% for CAS, the mean literacy for business taxation was below average with a result of 42%. When the literacy scores (LSs) were combined to create an overall literacy score (LS), the consequence of low business taxation meant that the overall LS was 50%. This could suggest that SBOs have an average level of literacy when implementing cash flow management strategies to support ongoing business success. To measure if SBO literacy has an impact on the financial performance of businesses, the research incorporated resource-based theory (RBT), which suggests that business with superior internal resources, when compared to their competitors, will achieve a higher level of financial performance. In terms of RBT, SBO literacy would be considered as an internal resource. In order to measure the relationship between internal resources and financial performance, the overall LS was compared to net income and annual revenue. The findings suggest that SBOs with higher overall LS will realise a level of financial performance superior to that of their competitors, indicating that SBO levels of literacy can have an impact on cash flow stability. SBOs’ confidence in understanding financial statements, CAS and business taxation was also explored, along with their confidence in implementing effective cash flow management practices. SBOs agree that they are confident in determining business profit and performance, in understanding GST, and knowing the functions and set-up of CAS. They were also confident in recording an accurate account of their debtors, creditors, revenue and expenses. SBOs had lower confidence in their understanding of income tax, PAYG withholding and SG, and in their ability to implement adequate cash flow management systems to support their business. In terms of cash forecasting and FBT, SBOs were to some extent uncertain about their ability to carry out cash forecasting activities and in their understanding of FBT obligations. When confidence was compared to literacy, the findings confirm that understanding of taxation, implementation of effective cash flow management systems and determination of profit and performance appear to be related to SBO literacy. SBO perception was examined in relation to the usefulness of financial statements and CAS for cash flow management, along with the impact to cash flow of currently enacted and proposed tax administration concepts. SBOs affirm that all financial statements and CAS are useful for cash flow management. However, it should be acknowledged that the balance of the bank account and the preparation of a cash budget was more highly regarded as useful when compared to actual financial statements. For business taxation, SBOs believe that the multitude of tax payments complied within each tax year can have unfavourable consequences to cash flow, as can paying tax liabilities after the due date. When perception was compared to SBO literacy, the results predominantly confirm that SBOs perception appears to be unrelated to SBO literacy. This study has several important implications. First, results of this research can make an important contribution to the existing body of knowledge relating to taxation literacy, tax and accounting education, managerial benefits from tax compliance and the cash flow and tax relationship. In terms of methodology, the strategies of inquiry implemented, contribute to the mixed methods design of taxation research. One original contribution to knowledge from the research includes the calculation of LSs for the understanding of financial statements and CAS and for the understanding of business taxation by service SBOs. The identification of literacy requirements in order to be considered as having adequate literacy creates a foundation for an SBO literacy framework to be further developed in the future.