Australian small-to-medium enterprises (SMEs) are anticipating a cashflow crunch as significant new payroll and tax policies are set to be rolled out over the next two years.
Starting 1 July 2025, SMEs are advised to brace for two key changes:
- The Superannuation Guarantee (SG) rate increase from 11.5 per cent to 12 per cent, which is expected to increase payroll costs for employers. Late payments will attract the Superannuation Guarantee Charge (SGC), which is not tax-deductible. As such, businesses are reminded to check employee contracts to see if super is included in salaries or needs to be paid on top.
- ATO interest charges would no longer be tax deductible as new tax laws will remove the ability to claim deductions for General Interest Charge (GIC) and Shortfall Interest Charge (SIC). This would entail that overdue tax liabilities would become more costly for SMEs in an attempt to further discourage late tax liability payments.
Two additional key payroll changes are set to take effect on 1 July 2026:
- Introduction of the payday super, which entails that superannuation contributions will need to be paid with every wage cycle instead of quarterly, requiring businesses to have funds available more frequently. Late super payments are not tax-deductible. Payday super was announced as part of the 2023-24 Federal Budget and is yet to be legislated.
- Closure of the Small Business Superannuation Clearing House (SBSCH) which is ATO’s free clearing house service. This means SMEs will need to find and pay for alternative platforms, such as Xero or MYOB, to process super payments.
Many industry leaders expressed worry that these upcoming changes would only serve to add to the burden of SMEs that have been struggling due to the crises they have faced in recent years.
Earlypay CEO James Beeson commented, “At a time when SMEs are already battling a tight labour market and rising operational costs, these changes will only add more pressure to their cashflow. Many businesses will need to rethink their finance strategies.”
ScotPac CEO, Jon Sutton also noted that the loss of tax deductibility from July 1 would make ATO payment plans a very expensive option for Australian businesses.
“Business owners with an ATO payment plan – or those considering applying for one – must understand the impact of these new rules and the options available to them,” Sutton said.
Experts are recommending for SMEs to do the following measures:
- Review budgets and payroll structures to account for increased SG rates and tax law changes.
- Ensure payroll systems can handle more frequent super payments.
- Explore alternative superannuation payment platforms before the SBSCH closure.
- Consider invoice finance to maintain steady cashflow and meet payroll and superannuation obligations.
Sutton has shared that financing alternatives such as business loans that act like a line of credit, invoice finance, or asset or equipment refinancing will be a superior cashflow solution for many businesses.
“Unlike the ATO’s General Interest Charge, the interest payable on the full range of loans from providers will remain tax-deductible after July,” he explained. “They are also likely to have longer repayment terms and more competitive interest rates, giving businesses more chance to get on top of their debt and keep the doors open.”
Beeson concluded, “SMEs need to act now to stay ahead of the changes and set themselves up for success.”
