Recent federal government announcements regarding tax collection methods have raised concerns for small businesses. The 2023–24 Mid-Year Economic and Fiscal Outlook (MYEFO) outlines a significant modification disallowing deductions for ATO interest charges starting from July 1, 2025. This move is expected to increase tax receipts by $525 million over the next four years.
By eliminating the deductibility of the general interest charge, the government is raising the cost of accessing finance with the ATO for small businesses. This may lead small businesses to explore external finance options.
Historically, small businesses facing challenges in obtaining finance from traditional sources have opted for payment plans with the ATO. However, the announced changes signify a shift away from the ATO serving as the primary financier for small businesses.
These alterations could bring unforeseen challenges for small businesses, especially with tighter restrictions on taxpayers’ access to payment plans. The ATO aims to scrutinise tax debt collection and requires businesses to demonstrate their capacity to settle tax debts, emphasising early repayment.
The ATO’s more assertive stance on collectable debt comes in response to concerns about businesses treating tax liabilities as interest-free loans. In its annual report, the ATO highlighted a focus on addressing collectable debt and improving small business tax performance, noting a substantial increase in small business collectable debt.
Are you a small business having issues with the tax collection changes? Contact our Walker Hill Accounting team today! support@walkerhill.com.au.
