The Current Small Business Tax Landscape
Cashflow and the Tax War: Why We Need to Reset Our Tax Payment Culture Now -
The Australian Taxation Office (ATO) has shifted gears, cracking down on outstanding debts and reinforcing a return to normal tax payment expectations. For small business owners, this means it's time to reset our tax payment culture and build financial resilience.
Some 2023 -24/ Small Business Observations;
2024 / 25 tax planning indicated strong profits but looming tax shortfalls.
March 2024 BAS payment plans were at record highs.
Total collectable debt owed to the ATO has surged to $52.4 billion, more than double pre-COVID levels.
Company insolvencies have risen 49% compared to last year.
The ATO is taking stronger action to recover debts.
The key takeaway? The COVID-era tax leniencies are over.
Small businesses need to shift from the ‘relief mindset’ back to disciplined tax management.
How Did We Get Here?
During COVID, businesses benefited from relief measures and incentives, including:
Immediate asset write-offs funded by debt.
Historically low interest rates, creating a false sense of financial ease.
Deferred tax payments and ATO leniency on debt and penalties.
Cashflow surpluses, leading to increased drawings rather than tax savings.
While these short-term gains provided breathing room, they’ve left many businesses facing deferred tax liabilities and the need to rebuild cash reserves.
The Risks of Ignoring ATO Debt
With the ATO in recovery mode, ignoring tax obligations comes with serious consequences:
General Interest Charge (GIC) at 11.34% – a costly addition to outstanding balances (as of 1st July 2025 - this will become non-deductable)
Limited scope for remissions – penalties and interest are unlikely to be waived.
Director Penalty Notices (DPNs) – directors can be personally liable for unpaid tax.
Unpaid Superannuation Guarantee Charge (SGC) – a red flag that triggers further penalties.
Garnishee Notices & Public Disclosure of Debt – businesses with unpaid tax may face enforcement action and reputational damage.
What Should You Do If You Have ATO Debt?
Don’t ignore it – the ATO won’t forget.
Set up a payment plan – if you owe less than $200k, you may be eligible for online or phone arrangements with lower GIC.
Assess your ability to pay – recurring debt issues mean it's time to reassess business cashflow.
Seek professional guidance – speak with your accountant before it spirals out of control.
Large Debt? Consider Your Options
If ATO debt is overwhelming, structured solutions exist:
Small Business Restructure (SBR)
Available for companies or corporate trustees.
Appoint a Small Business Restructuring Practitioner.
Retain control of operations while restructuring debt.
Debt must be under $1 million.
Company must be solvent, up-to-date with lodgements, and have employee entitlements paid.
Expect to repay 20-30 cents per dollar over three years.
Cost: Approx. $15k.
Voluntary Administration
Suitable for insolvent companies.
Control is handed to an administrator.
Can lead to liquidation.
Cost: $30k+.
Proactive Cashflow Tips for Tax Management
The best way to avoid tax debt is to plan ahead.
Here’s how:
✅ Review your profit & loss monthly – understand your financial position.
✅ Set aside 30% of profits for tax – treat it as a non-negotiable.
✅ Pay your super and wages tax on time – this prevents accumulating penalties.
✅ Calculate GST monthly and put it aside – avoid last-minute BAS shortfalls.
✅ Manage drawings carefully – take a fixed monthly amount rather than ad-hoc withdrawals.
✅ Set business and personal budgets – control expenses to maintain a healthy cashflow.
Need Help Navigating ATO Debt?
If you’re feeling overwhelmed, now is the time to act. At RWK Accountancy, we work with small businesses to build proactive tax strategies, manage ATO negotiations, and strengthen financial resilience.
📞 Call us today to discuss your options and secure your business’s future.
🔗 Useful resources:
RWK Accountancy – Your Business Growth Partners
