What Businesses Need to Know Before July 1
From July 1, 2025, businesses with outstanding tax debt will no longer be able to claim the ATO’s General Interest Charge (GIC) as a tax deduction. This change will significantly increase the real cost of carrying tax debt – just as the ATO ramps up its enforcement efforts.
With over $50 billion in overdue tax liabilities owed by Australian businesses, the ATO is under pressure to collect. But what’s behind this push, and what does it mean for business owners?
Let’s unpack the why, how, and what you can do about it.
Why is the ATO Chasing Tax Debt More Aggressively?
There are a few key drivers:
- Economic recovery and budget repair: The government is under pressure to improve the budget bottom line after years of stimulus spending. Tax debt recovery is one way to boost revenue without raising taxes.
- Fairness and compliance: Many businesses are doing the right thing, while others have fallen behind. The ATO is aiming to level the playing field by ensuring all taxpayers meet their obligations.
- Preventing long-term insolvency: Unchecked tax debt can be an early warning sign of business distress. Early intervention can lead to better outcomes for all parties.
What Strategies is the ATO Using to Recover Tax Debt?
Since early 2023, the ATO has become significantly more proactive. If your business has an outstanding liability, here are some of the tools the ATO may use:
- Director Penalty Notices (DPNs): Making directors personally liable for PAYG withholding, GST, and superannuation debts.
- Garnishee Notices: Requiring a business’s bank or customers to redirect funds directly to the ATO.
- Debt Disclosure: Listing tax debts with credit bureaus, which can affect your business and director credit files.
- Wind-up Proceedings: In severe cases, the ATO may commence legal action to liquidate a business.
Even if you’re currently negotiating a payment plan, these actions may still be taken if the ATO determines that your business is not engaging constructively.
What Can You Do? Financing Options to Consider
If your business has tax debt, it’s crucial to take action early, especially since ATO interest is no longer deductible. At Captiva Finance, we help small and medium-sized businesses manage this risk and regain control. Some financing options to consider include:
Refinance ATO Debt Through Various Loan Options
- Secured Property Loans: Leverage your property to secure a loan, potentially accessing lower interest rates and better terms.
- Lending Against Other Secured Assets: Utilise other assets (such as equipment or inventory) as collateral to secure financing, offering flexibility in repayment terms.
- Unsecured Lending: If you prefer not to, or don’t have access to collateral, consider unsecured loans to refinance your tax debt, although these may come with higher interest rates.
Preserve Your Credit Reputation
- Avoid having tax debt reported to credit agencies.
- Protect directors’ credit files by keeping the business out of wind-up or enforcement actions.
- Enhance your opportunities for securing credit in the future.
Improve Cash Flow and Reduce Stress
- Free up funds to support operations, staffing, or growth.
- Create certainty and peace of mind through structured repayments.
Need Help Navigating This?
If you’re concerned about tax debt or want to explore your options, I’d be happy to have a confidential discussion.
You can reach me directly here on LinkedIn or at glenn@captivafinance.com.au.
Let’s work together to take the pressure off — before the new rules take effect.