Plus, from July 1, 2025, interest on your ATO debt will no longer be tax deductible, meaning you’ll have to pay even more tax – and go further in debt – come tax time.

“This will have quite a massive impact on clients,” Catarina Santini, a registered tax agent and owner of CS Accounting, told ISB. “A lot of clients are going on payment plans just because of the economy.”

So, what can small-business owners do if they owe the ATO? We asked Santini and a fellow tax agent, Morgan Wilson from Creditte, about the current state of play and what they’re telling their clients.

What to do if your business owes the ATO in 2025

Engage early

If you’re facing down tax debt, you can’t bury your head in the sand: You need to engage early. 

Wilson advised to keep up with your lodgement and talk to your tax agent – anything to show the ATO that you’re getting on top of things.

“Get on the front foot with it,” he advised. “Even if it’s purely just talking to your tax agent – you can at least have that file note there.”

Santini echoed this sentiment, and added that it’s worth having conversations about payment plans sooner rather than later. Also, start getting your documents in order – you may need up-to-date figures (i.e. cashflow or P&L) to negotiate a payment plan.

Get a payment plan

Your best option if you have ATO debt is to get a payment plan. If you’ve never had a payment plan before, you should be able to get one via the ATO business portal. If you have, you may have to call up instead. 

Santini said that the ATO has historically liked 12-24 month plans the most. However, this might be changing. In one case, Santini tried to negotiate a seven-month payment plan for a client and was told that they only allow six month plans – two weeks after she had netted another client a 24 month plan.

“I’m going to be honest with you, it depends on who [at the ATO] you talk to,” she said. “You can ring the ATO two times in one day and get two different responses, which I’ve had.”

Wilson is seeing a similar situation with his clients. He said that some have had better luck getting a payment plan when they called the ATO themselves, rather than doing it through a tax agent.

“A lot of it is hang up, try again, and see if you get the right person,” he said.

Both Santini and Wilson agreed that payment plans are much harder to get nowadays.

“A few years ago it was so easy to get a payment plan,” said Santini. “But right now, we are having to really push it. We’re having to show P&L, cashflow, and argue a point.”

Even mental or physical health issues might not be enough to get some compassion, according to both tax agents.

“There’s been some heartbreaking stories of physical and mental health issues,” said Wilson. “But the ATO have been blunt around ‘We don’t care.’”

In some circumstances, a loan might be worth it

Getting a loan to pay off ATO debt isn’t an ideal scenario, but it can be the right option in some situations. For instance, if you’re going through a business lull, but know that cashflow will be back in six months’ time, you might consider a loan to get you through the quiet period, said Santini.

Wilson agreed that a loan can be a good move to keep the business rolling along short term, in specific scenarios.

“If you’ve got suppliers on account and the ATO does ding your credit file, your suppliers can easily go ‘We’re cash on delivery now,’” he said.

The other benefit of these loans is that interest on them will remain tax deductible after July 1 – but their cost-effectiveness would, of cost, depend on the interest rate.

Both tax agents emphasised that loans are extremely context specific and that business owners should discuss their unique situation with their tax professional first.

Explore restructuring

Your last resort is engaging an insolvency practitioner to help you and taking advantage of the small business restructuring arrangement that was introduced in 2021. 

Wilson told ISB that this is becoming more popular, but that it’s a last-ditch effort. He told small-business owners to hang in there if they can.

“Hang in there – get professional help, your tax agent is there to help you,” he said.

Santini has seen clients with hundreds of thousands in tax debt turn things around – so there is hope. 

“Seek some support and come up with a strategy,” she said. “Own what you owe and work out a plan to go forward – once you’ve done that you can start achieving something.”

The post Tax debt is tougher for SMEs in 2025. Here’s what to do if you owe the ATO appeared first on Inside Small Business.

Small-business owners carrying ATO debt have just shy of nine weeks before the General Interest Charge (GIC) on tax debt will no longer be tax deductible. This change eliminates the tax benefit that effectively reduced the real cost of the interest by 25 per cent for most businesses.

I’ve seen firsthand how tax debt can silently erode a business’s financial foundation. Now, with this legislative change on the horizon, addressing ATO debt becomes even more urgent.

The real cost of the GIC deductibility change

Currently, the ATO’s General Interest Charge sits at 11.17 per cent and compounds daily. While this rate can sometimes exceed business loan options, it has been somewhat offset by tax deductibility. For a business on a 25 per cent tax rate, the effective cost has been around 8.38 per cent after tax deductions.
From 1 July 2025, that disappears. The full 11.17 per cent (or whatever the rate is by then) will hit your bottom line with no tax relief which could mean thousands in additional costs annually.

Even before this legislative change, ATO debt has always been problematic from a financial management perspective. The compounding daily interest means your debt grows more rapidly than most people realise. A $50,000 tax debt accrues over $15 in interest every day – that’s more than $5,500 annually.

The financeability factor

ATO debt also impacts a business’ broader “financeability.” When assessing loan applications, lenders can view significant or long-standing tax debt as a signal of financial management issues. The big banks often see ATO debt as a huge red flag for lending to a small business, and even much more lenient non-bank lenders see it as a negative indicator, especially if your ATO debt exceeds 8-10 per cent of your annual turnover.

The compounding effect of both higher costs and reduced financing options makes addressing tax debt before July 2025 even more critical.

Strategic options for clearing tax debt

If you’re carrying ATO debt and are concerned about the upcoming changes, or you’ve got a tax bill that you simply can’t pay, reach out to a financial professional to discuss your specific situation.

Additionally, businesses should consider:

1. Working with the ATO – Contact them proactively to establish a payment plan. While this won’t avoid the interest entirely, it demonstrates good faith and offers a structured approach.
2. Prioritising tax debt in your cashflow – With costs set to increase, allocating available funds to reduce tax debt makes more financial sense than ever. You will also be demonstrating a track record of proactively meeting tax obligations.
3. Considering refinancing options – Refinancing tax debt can:
   • Lock in a fixed interest rate that may be lower than the GIC
   • Provide a structured repayment schedule aligned with your cash flow
   • Convert a problematic debt into a standard business expense (business loan interest is tax-deductible, unlike the GIC after 1 July)
   • Improve your overall creditworthiness and set yourself up for cheaper debt over time

Also, depending on the business, there are other solutions that can unlock capital from elsewhere in the business to help pay off ATO debt and improve the cashflow position long term. These include invoice financing to access the value from unpaid invoices or unlocking equity in business assets like vehicles or equipment.

Businesses should pay close attention to the impact of the repayment term of their ATO debt compared to a replacement business loan. ATO repayment plans are often structured to repay the outstanding debt over 18 to 24 months. Many non-bank loan options can be structured for 36 months (or even longer), significantly reducing monthly repayments for businesses that are cash-strapped. Even if the business loan’s interest rate ends up being higher (after tax deductibility) than the GIC on ATO debt, it still may be worthwhile to refinance if the business loan significantly reduces month-to-month cash stress on the business (and its owners!)

Getting ahead of the deadline

With 1 July 2025 approaching, businesses should:

1. Calculate the true impact – Determine exactly how much more your current ATO debt will cost after the deductibility changes. Remember that removal of the deduction will impact tax paid on your highest marginal rate not your average tax rate! Work with your tax agent to be as accurate as possible.
2. Review cashflow projections – Assess whether your current payment arrangements will clear the debt before the deadline and if not, start adding as much as reasonably possible
3. Explore all available options – From accelerated payment plans to refinancing, find what approach makes the most financial sense for your situation

The clock is ticking on tax debt deductibility. By addressing this issue now, you not only avoid the coming price increase but also position your business for stronger financial health and better financing options in the future.

The post Why ATO debt should become your top financial priority in 2025 appeared first on Inside Small Business.

Of the ATO tax debt defaults reported to CreditorWatch, over 34 per cent have become insolvent or closed down.

The ATO discloses tax debt to credit reporters like CreditorWatch when a business has a tax debt of over $100,000 and is more than 90 days in arrears.

SMEs are the largest cohort of businesses with tax debt defaults, owing the ATO a formidable $34 billion.

“I truly sympathise with the situation that these businesses are in, with such a huge amount of tax owing,” said CreditorWatch CEO Patrick Coghlan, who is pictured above.

“A tax debt of $100k or more is a huge drag on a business, particularly SMEs, which make up the largest cohort of businesses with tax debt defaults.”

Post-pandemic debt crackdown

The ATO has reportedly ramped up its debt collection activities as it stares down $52 billion in unpaid tax. 

The substantial outstanding debt “blew out” during the pandemic, according to CreditorWatch. In this period, the ATO took a softer approach to debt enforcement.

The tax office is now taking a variety of measures against indebted businesses, including business tax debt disclosures to credit reporting bureaus, garnishee orders and Director Penalty Notices.

The post SMEs owe $34 billion in tax debt. Now, thousands are closing down. appeared first on Inside Small Business.

This finding comes from the latest Alares Monthly Credit Risk Insights report which stated that SBRs accounted for more than 14 per cent of all insolvency appointments in April, while VAs accounted for almost 14 per cent. Furthermore, court liquidations were over 19 per cent as the ATO has remained active in pursuing direct court recoveries while the big four banks have remained “vigilant”, according to the report.

“Since the start of the (calendar) year we have experienced a noticeable uptick in Small Business Restructuring plans and Voluntary Administrations to resuscitate or restructure businesses across a wide range of industries,” Andrew Spring, Partner at Jirsch Sutherland, said. “Tax debt is the primary reason but higher operating costs are also pushing businesses to or over the edge.

“It’s obvious that out of necessity, an increasing number of businesses are discovering the benefits of Australia’s business rescue solutions,” Spring added. “We have some of the most advantageous legislation in the world: it’s both quick and commercially focused, but it shouldn’t be a last-minute or enforced decision.” 

And with insolvency figures still remaining well above pre-COVID levels, Jirsch Sutherland is urging business owners to overcome their fear and shame of being found to be insolvent and give their business the best chance of survival by availing SBR and VA measures.

“As the ATO continues to work through the record amount of outstanding tax debt, it’s increasingly driving small businesses into SBRs and larger businesses into Voluntary Administrations,” Patrick Schweizer, author of the Alares Monthly Credit Risk Insights report, said. “And our April report shows that insolvencies remained 50 per cent above pre-pandemic levels, reinforcing the long anticipated catch up in insolvencies from the pandemic lows. “Non-ATO initiated winding up applications were slightly down compared to March, which again points to the ATO currently being the key driver for insolvencies.”

Spring pointed out that the creditor community is becoming less tolerant to operational behaviours that may have contributed to a business’s financial distress, and that the ATO is again at the forefront of this changing creditor position.

“It’s placing an even higher level of scrutiny on historical compliance when considering a proposal for restructuring,” Spring warned. “Anecdotally, we’re hearing this is also the case with pre-insolvency discussions regarding ATO payment plans.

“As an involuntary creditor, the ATO doesn’t have the option to withdraw credit from a business – nor does it automatically know they’re even in a trading relationship until the liability is self-reported,” he added. “As such, a high importance on reporting compliance is required to allow an effective and efficient tax system. During the last few ‘pandemic years’ the ATO appeared to move away from this position, and for those that have become delinquent with their lodgement activity, the hammer is about to drop. If a business has fallen behind with their statutory compliance, it’s crucial to act now.”

Spring also shared that having a strong business rescue framework (such as the SBR and VA regimes) provides an opportunity for those businesses that have encountered some form of extraordinary distress – such as bad debts, weather events or pandemic influences – to not be forced to close, thus preserving greater value for creditors and stakeholders.

“A robust insolvency framework has many advantages, including recycling underperforming resources such as labour and equipment assets, into viable business ventures,” he said. “It also provides a balance between the debtor and creditor relationship, as well as giving confidence to markets that anti-competitive behaviours by unscrupulous players in the market will be investigated and held accountable.”

The post More Aussie businesses turning to business rescue programs to address tax-debt insolvency appeared first on Inside Small Business.

Under its new policy, taxpayers will now need to prove they have the capacity to pay the tax debt, with an emphasis on the taxpayer paying off the tax debt as early as possible.

The announcement comes in the wake of the recent changes to tax collection methods made by the Federal Government as part of the MYEFO announcement.

Chartered Accountants ANZ (CA ANZ) believes with this new policy could see small businesses facing unforeseen pain.

“With more than $95 billion in tax debt to collect, it is not surprising that attention is being given to the collection of that debt,” CA ANZ Senior Tax Advocate, Susan Franks CA said. “Small businesses can have difficulty accessing finance from traditional financial service providers.

“With the general interest charge approximating the small-business interest rate charged by banks, small businesses have found it easier to apply for finance in the form of a payment plan with the ATO than a loan from a bank,” Franks added. “This is evidenced by small business owing most of the outstanding collectible debt.

“Denying deductibility of the general interest charge will effectively increase the cost of accessing finance with the ATO and make obtaining external finance more attractive,” she continued. “The days of the ATO being the banker for small business are numbered. Small businesses should talk to their Chartered Accountant about their cashflow and financing to ensure that they can pay their tax on time.”

The post Stricter ATO tax debt policy to affect small businesses appeared first on Inside Small Business.

As the ATO shifts back to business-as-usual debt collection, the agency has issued Notices of intent to disclose business tax debts to more than 22,000 businesses with a tax debt of at least $100,000 that is overdue by more than 90 days.

More than 9000 businesses are expected to have their debts disclosed this month. 

ATO Assistant Commissioner Jillian Kitto said paying or engaging with the ATO is the only way to stop a business’s tax debt from becoming visible in credit rating checks.

“We want to work with businesses to help them get on top of their debts,” Kitto said. “Anyone with a debt is encouraged to reach out to us as soon as possible. We give businesses ample opportunity to re-engage with us.

“However, those who show continued and ongoing disregard for their tax and super obligations will have their debts disclosed,” Kitto added. “While we do not take disclosures lightly, consequences will apply to businesses who refuse to pay or engage with us.”

Businesses are being urged to pay their debt or enter into an appropriate payment arrangement within 28 days of when the intent to disclose notice was issued to prevent disclosure. Such disclosures can impact a business’s ability to receive finance and may lose suppliers as well.

The ATO expects more than 50,000 notices of intent will be issued in the 2023-24 financial year.

“Through the pandemic, we shifted our focus from debt collection to stimulus payments and assistance with tax, but it is now time to re-establish the culture of paying tax on time,” said Kitto. “There is over $5 billion owed by businesses who currently meet the criteria for disclosure. We must draw a line in the sand to protect the Australian community and other creditors, and to ensure a level playing field for businesses who do the right thing.

“If you have an outstanding tax debt, we strongly urge you to pay it or reach out to us or your tax professional so we can provide the right support,” she concluded.

The post Businesses reminded to pay their tax debts to avoid disclosure to credit agencies appeared first on Inside Small Business.

The news comes on the back of the tax amnesty program that the ATO introduced in May, which waives failure to lodge penalties for Australian small businesses.

The amnesty applies to small businesses with a turnover of less than $10 million with overdue income tax returns, business activity statements and fringe benefits tax returns that were due between 1 December 2019 and 28 February 2022

Small businesses, especially those with potential overdue tax payments, are urged to take advantage of the amnesty which is set to end on 31 December 2023.

“This is a great opportunity to proactively engage with the ATO and take advantage of the remission of late lodgement penalties,” Angus Sedgwick, CEO of financing company OptiPay, said. “Taking a ‘head in the sand’ approach will mean more pain and expense in the near future as the ATO will catch up with businesses that have not lodged returns.

“Once you have lodged the overdue returns, I would then recommend engaging with the ATO to agree to a tax payment plan to pay the arrears,” Sedgwick added.

The ATO is currently owed $30 billion in tax debt including $1.6 billion in superannuation payments owed to employees.

“Now would be a good time to remind company directors that in some circumstances they can be personally liable for unpaid GST, PAYG and unpaid employee superannuation guarantee payments,” Sedgwick concluded.

The post Thousands of SMEs make use of ATO tax amnesty appeared first on Inside Small Business.

The ATO is currently pursuing these debts and obligations at breakneck speed as findings indicate that the tax debts have now reached more than $34 billion.

As Australia’s largest creditor, ATO’s debt booked has jumped by 77.6 per cent in just four years, with small businesses sharing the largest burden of this debt, comprising 62.6 per cent of the total book value.

Already, the agency has sent over 50,000 Director Penalty notices as initial moves. Insiders are closely monitoring as well what the next moves of the ATO will be.

Ulrika Lobo, Director of Sparrow Loans, believes that corporate insolvencies and voluntary administrations will rise and has warned directors about ignoring communication from the ATO.

“What many directors may not realise is that any unpaid ATO debts, PAYG and superannuation accrued and owed by the business become the personal responsibility of the director if the business cannot pay them,” Lobo said. “Lenders may be able to see your outstanding tax debt on your credit file too, which can affect your current loans or your applications for new loans, especially if they are over $100,000”, she added.

Adam Preiner, director of Integra Restructuring and Insolvency, commented on the significance of outstanding tax debt, saying, “Company tax debts over $100,000 will be reported on your credit file. Once the ATO starts ramping up its collections, directors should communicate and negotiate with the ATO to avoid or minimise penalties. Don’t ignore any penalty notices.”

Reports note that the ATO debt has been growing since 2019, further aggravated by suspended debt collection during the COVID-19 pandemic. Debt growth outpaced both inflation and the GDP, which has been a source of worry among some observers.

The post Tax debts reach $34 billion as ATO resumes collection activities appeared first on Inside Small Business.

It is really important for businesses to urgently get their ATO debt under control. The ATO has resumed its debt collection activities after a pause last year during lockdown.

This means businesses need to really focus on clearing the debt as the ATO pursues harder collection measures, particularly given the challenges facing the country in the year ahead.

Businesses need to get on the front foot and set themselves up for a positive year of growth and clearing ATO debt is an important component of this.

To assist the business sector, Earlypay has partnered with leading tax debt specialist, Tax Assure, to deliver a FREE seminar for businesses and professionals on how to manage and fast track paying down ATO debt.

Seminar details:

• How to manage and pay down tax debt fast.
• Speakers: Arthur Athanasopoulos, State Manager, Earlypay and Olga Koskie, Principal, Tax Assure.
• Date and time:  Thursday 24 March, 11am AEST.
• Registration: https://us02web.zoom.us/webinar/register/1216461948230/WN_-q00Sp1QSsinNu7Od_Zr0w.

The seminar will cover:

• Important information and tips for businesses to assist them to improve their relationship with the ATO.
• Strategies for businesses to better manage their tax debt situation.
• Insights into how to reduce penalties and interest.
• Tips on how to address, manage and resolve outstanding debt.

With valuable insights regarding tax debt and cash flow solutions, the seminar is ideal for:

• Business owners and CFOs.
• Industry professionals, ie, accountants, insolvency and turnaround specialists, bookkeepers.
• Business advisers and coaches.
• Anyone else who is in a position to help businesses.

Businesses need to know their true situation, consult with experts, develop and implement strategies and look to options such as Sale-back Finance and Invoice Finance to inject cash into the business.

The FREE seminar will cover these issues and many more to assist businesses to navigate their way forward and clear their ATO debt faster.

The post Clear your ATO debt FAST with these expert tips appeared first on Inside Small Business.