It’s June — which means tax time is officially here. But for many small and medium business owners, tax debt isn’t just a once-a-year issue. It’s an ongoing pressure that affects cash flow, peace of mind, and long-term business decisions.
And this year, there’s a change that could make things more expensive if you’re carrying any tax debt.
What’s Changed?
From 1 July, interest charges applied by the ATO — the General Interest Charge (GIC) and Shortfall Interest Charge (SIC) — will no longer be tax-deductible.
In the past, these interest charges could reduce your overall taxable income. That’s no longer the case. Now, they’re an after-tax cost, which means they’ll hit your bottom line harder.
Put simply: tax debt just got more expensive to carry.
Why This Matters for Your Business
This change may feel like another hit for SME owners already dealing with rising costs, late payments, and tightening margins. But here’s the important thing:
This isn’t a reason to panic — it’s a reason to plan.
Some businesses might feel pressured to repay all their tax debt immediately to avoid the higher cost. But in many cases, rushing repayment — especially by dipping into personal finances or borrowing without a clear plan — can do more harm than good.
Instead, a smarter approach is to:
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- Manage your tax debt strategically within your business.
- Keep open communication with the ATO.
- Explore remission opportunities (yes, the ATO can waive interest charges in certain cases).
- Avoid exposing your personal assets unless absolutely necessary.
- Manage your tax debt strategically within your business.
What You Can Do Right Now
If you’ve got tax debt or think you might soon, here’s where to start:
- Get a clear view of your position – Sit down with your bookkeeper, accountant, or financial advisor to understand exactly what you owe, what it’s costing, and what your cash flow can realistically handle.
- Don’t ignore ATO notices – The ATO is ramping up enforcement and debt collection. Ignoring emails or letters doesn’t make the problem go away — in fact, it can reduce your options for negotiating better terms.
- Seek tailored advice – Every business is different. What works for a retail business might not work for a tradie or a consultancy firm. Talk to someone who understands your industry, your obligations, and how to manage risk.
- Keep emotions out of it – It’s easy to feel embarrassed, overwhelmed, or pressured when facing tax debt — especially with media headlines talking about rising insolvencies. But business owners who act calmly and strategically often come out the other side stronger.
What the Latest Data Shows
ATO data from the last quarter reveals a clear trend:
- Tax debt is rising, particularly among small businesses.
- Enforcement activity is increasing, with more letters, calls, and firmer collection actions underway.
- But — and this is crucial — the ATO is still open to working with businesses that engage early and honestly.
So even though the cost of tax debt is rising, there are still options on the table — if you approach it proactively.
Final Thought: Don’t Let Tax Debt Take Control
Yes, tax debt just got a little more expensive. But that doesn’t mean you have to panic or throw your business off course to deal with it.
With the right advice, a solid repayment plan, and a bit of breathing room, many SME owners can manage this challenge without putting themselves or their business at risk.
The key is not speed — it’s strategy.
If you’re unsure about your options or want to better understand how this change affects you, get in touch. We’re here to help you take control, stay compliant, and make smart financial decisions for your business — not just at tax time, but all year round.
