The Australian Taxation Office (ATO) has earmarked 2025 as the year for businesses to get their tax and superannuation debts back on track.

From 01 July 2025, the cost of tax debt for businesses will increase significantly, when the general interest charge (GIC) and the shortfall interest charge (SIC) become non-deductible. In addition, the ATO is changing their approach to collecting unpaid tax and super - all of which is aimed at incentivising businesses to pay outstanding debt to the ATO first.

Current policy

Tax debt owed to the Australian Taxation Office (ATO) is subject to SIC and GIC, which are currently tax-deductible.

GIC is incurred when a taxpayer fails to lodge and pay their taxes by the due date. The current annual GIC rate is 11.42%.

SIC is incurred in instances of taxpayer errors which result in underpayment of tax. The current annual SIC rate is 7.42%.

Proposed policy

The new policy would see GIC and SIC charges incurred from 01 July, 2025 onwards become non-deductible, essentially increasing the cost of tax debt.

This change comes amid an ATO crackdown on outstanding debt, with record numbers of director penalty and garnishee notices being issued. These measures are designed to accelerate collection of over $50 billion of tax debt owed to the ATO, exacerbated by COVID-era leniency. 

Supporting small business to repay debt

The Australian Banking Association (ABA) has collaborated with Chartered Accountants Australia and New Zealand (CAANZ), CPA Australia (CPA), and the Australian Taxation Office (ATO) to help inform [create a support-based factsheet for] small business customers who might be struggling to pay their debts on time.

Australian Banking Association CEO Anna Bligh urged small business owners to reach out to their bank if they were worried about their finances.

“If you're feeling stressed about your finances or existing debts, seek help from your bank, accountant, or a financial counsellor right away. For any debts you have with the ATO, get in touch with them early on so they can work with you on managing the debt.”

ATO Assistant Commissioner Anita Challen said the ATO is encouraging businesses to engage early to get on top of their debts.

“We want to work with businesses to help them get back on track with paying their tax debts. For small businesses who need support, there are a range of support options available. We encourage small business owners to reach out to the ATO or a trusted advisor early to identify options that may help their business remain viable.”

Anita Challen, Australian Tax Office Assistant Commissioner

Ms Bligh said that the financial services industry knows that customers are feeling the pinch of the cost of living, and this is especially true for our small business owners.

"Our small businesses are incredibly resilient, but banks want customers to know they are not alone if they feel like they are struggling to make repayments.”

"Don't be afraid to contact your bank as soon as possible. They have specialised teams ready to help, and the sooner you get in touch the sooner your bank can review your circumstances.”

CEO of Chartered Accountants Australia and New Zealand (CA ANZ), Ainslie van Onselen has encouraged small businesses to work with their chartered accountant at the first sign their business may be under financial stress.

“Chartered accountants have the expertise to help your small business find the best path forward from looking at your business structure, to identifying cash-flow improvements and helping manage outstanding debt.

“In a cost-of-living crisis, having a chartered accountant in your corner supporting your business is a great way to manage through economic and financial pressures.”

CPA Australia’s Chief Executive Officer, Chris Freeland highlighted the critical nature of Australia’s small businesses and encouraged those struggling to seek support.

“Small businesses are an essential part of our economy and millions of enterprising Australians live and breathe their business. This is great when things are going well, but circumstances can change quickly and leave small business owners feeling overwhelmed and under pressure, particularly when dealing with their finances.

“Business success requires informed decision-making, healthy financials and great advice. Understanding the overall position of your business, including managing your debts and tax obligations is critical to survival and growth. When you need help with debt, seeking support becomes your next good business decision.

Seeking advice from your accountant or bank will give you a better understanding of your options and allow you to make more informed decisions. It could prove to be the best thing you did. CPA Australia is committed to supporting small businesses navigate the ever-evolving regulatory and economic environment.”

Falling behind with your business tax repayments?

If your business is concerned about tax debt or financial stability, our Business Advisers and Chartered Accountants at The Peak Partnership can help.

Download our Supporting Small Business fact sheet for more information and feel free to contact us today to discover long-term solutions for your business, including cash flow management, restructuring and refinancing options.