Australian small business are being to urged to review cash flow strategies as a tax change next week has costly implications.
Chartered Accountants Australia and New Zealand (CA ANZ) Tax Expert Susan Franks said from July 1 interest charged by the Australian Taxation Office (ATO) on late tax payments, currently set at 11.17 percent and compounding daily, would no longer be tax deductible.
Ms Franks said this significant change to tax deductibility rules could cost business thousands of dollars.
She said the change would substantially increase the real cost of falling behind on tax obligations, particularly for small businesses already operating on tight margins.
“Small businesses currently hold the majority of the ATO’s outstanding tax debt, and this change will make that debt even more expensive.
“We’re encouraging all small business owners to speak with their accountant now to avoid being caught out when the financial year ends.”
Ms Franks said more than $45 billion in tax debt was owed by small businesses.
“The interest on tax debt that’s payable to the ATO compounds daily.
“Previously, small businesses may not have been concerned about accumulating interest on tax debt, as it was deductible at tax time.
“But from 1 July 2025, small businesses could find themselves in a difficult situation and if not managed carefully, interest owed to the ATO could quickly exceed the amount of tax they were originally meant to pay.”
