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The removal of the ability to claim deductions for ATO interest charges and an increase in the Super Guarantee on 1 July will place further pressure on cash flow, SME lenders have warned.
SMEs brace for ‘cash flow crunch’ ahead of tax and super changes
09 April 2025
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8 minute read
An increase in the superannuation guarantee rate along with the removal of the ability to claim deductions for the general interest charge (GIC) and shortfall interest charge (SIC) from 1 July 2025 will force businesses to review their finance strategies, finance providers Earlypay and ScotPac have cautioned.
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The superannuation guarantee rate is set to increase from 11.5 per cent to 12 per cent, which will increase payroll costs for employers.
Earlypay said businesses should check employee contracts to see if their super is included in salaries or needs to be paid on top.
“Late payments will attract the Superannuation Guarantee Charge (SGC), which is not tax-deductible, adding further financial strain,” Earlypay said.
“While this benefits employees’ retirement savings, the downside is that it potentially increases payroll expenses for employers.”
In addition, the removal of deductions for GIC and SIC will make overdue tax liabilities even more costly for SMEs.
“Currently, businesses can claim these interest charges as tax deductions, but the proposed change aims to remove this benefit, making overdue tax liabilities more costly for SMEs in an attempt to further discourage late tax liability payments,” Earlypay said.
Earlypay chief executive James Beeson said Australian SMEs are bracing for a “cash flow crunch” as they prepare for the changes commencing on 1 July.
“At a time when SMEs are already battling a tight labour market and rising operational costs, these changes will only add more pressure to their cash flow,” Beeson said.
“Many businesses will need to rethink their finance strategies.”
While the introduction of payday super will not commence until 1 July 2026, Beeson said this would also place further strain on businesses in 2026.
“Superannuation contributions will need to be paid with every wage cycle instead of quarterly, requiring businesses to have funds available more frequently.”
In order to navigate these various changes, Beeson said SMEs should review budget and payroll structures to account for increased SG rates and tax law changes.
They may also need to consider invoice finance to maintain steady cash flow and meet payroll and superannuation obligations, he added.
Businesses will also need to ensure payroll systems can handle more frequent super payments ahead of the introduction of payday super.
ScotPac chief executive Jon Sutton said the loss of tax deductibility from July 1 would make ATO payment plans a very expensive option for Australian businesses.
“Business owners with an ATO payment plan – or those considering applying for one – must understand the impact of these new rules and the options available to them,” Sutton said.
He added that businesses may need to explore financing alternatives like business loans that act as a line of credit, invoice finance or asset and equipment refinancing.
The interest payable on these types of loans would remain tax-deductible after 1 July, Sutton said.
“I urge any business owner with an ATO payment plan or a looming tax debt to talk with their key advisors about available options ahead of these new rules coming into effect on July 1.”
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