31 July 2025
For small businesses 2025 will be a year of change. Starting on 1 July the ATO has adjusted its sights, announcing that it’s intensifying its scrutiny, particularly around small business GST, PAYG, and superannuation guarantee charges.
“The ATO is framing this as a proactive approach to compliance,” says AR & B Advisors Director, Ryan Brown, “and are tightening up their focus after the relaxed post-COVID years.”
And in doing so, businesses need to be much more aware of proper tax protocol—or face strict penalties.
Why did the ATO announce this crackdown?
“The ATO exists to collect tax that funds vital services for Australia. That’s their role—not to lend money,” Ryan states. “It found in recent years that many small businesses were relying on relaxed tax debt payment timelines, and leveraging the resulting interest as a tax deduction. Tired of being a lender of last resort, they decided to rein things in.”
Essentially, this change in policy was announced to combat the $50+ billion tax debt that was owed to the ATO following their more lenient processes as the country navigated its way out of COVID restrictions.
The ATO has access to more information than ever before
The announcement may come as a shock to some business owners, but with the sheer volume of information available to the ATO now, it’s not wholly surprising.
With more tax and business information available online than ever, the ATO has a wealth of data to work with. This information, coupled with an increased use of AI tools and real-time data analysis, means that the ATO can chase businesses immediately.
The key focus areas of the ATO crackdown
There are a number of key areas where the ATO is narrowing its focus and taking a more forensic approach to small business tax debt.
Superannuation guarantee charges
The ATO is taking a stronger stance on superannuation guarantee charges, and any outstanding or late superannuation payments to employees will now face tighter scrutiny.
Tightened reporting criteria
The ATO is taking a closer look at business capital gains tax concessions, undertaking careful analysis of whether or not claims fit the criteria. They are also clamping down on non-commercial business losses, and a repeated history of losses year on year will raise a red flag.
Eliminating interest claims
The biggest changes felt under the ATO crackdown will be the way general interest charges (GIC) and shortfall interest charges (SIC) are handled. As of 1 July 2025, neither of these interest charges will be considered a tax deduction. This negates any incentive earned from holding off on debt repayment, while also actively making any small business tax debt more costly for the company.
Small business GST obligations
Coming off the back of a series of high-budget instances of GST fraud, small business GST reporting and payments will be a big focus, and will see more in-depth reviews of GST claims. This comes after the 1 April announcement that businesses with a history of late or incorrect GST lodgement would be switched from quarterly reporting to monthly.
Tax deductions
The ATO is sharpening its focus on business tax deductions. While most do claim deductions honestly, and any breaches of the criteria may be simply a misunderstanding of what’s allowed and what’s not, SMEs need to be aware that the ATO is taking notice.
What this means for small businesses
With its increased digital capacity the ATO will now be able to identify and act on any business issues faster. Company directors are now in the firing line, too, and are considered personally liable for these found errors. Instances of PAYG withholding, breaches of paying their superannuation guarantee charges on time, and even GST debts can all result in a Director Penalty Notice.
And it’s already begun: there have even been extreme circumstances of the ATO stepping in and trying to liquidate companies found to be severely in breach.
“95% of SMEs are doing the right thing—it’s only a small percentage who are skirting on the fringes,” says Ryan. “But this means that even businesses with good intentions are now finding it increasingly difficult to negotiate with the ATO.”
With increasing costs and rising debt, some businesses may find it harder to stay on top of their ATO obligations by themselves.
So, what can a small business do?
Ultimately, much of this pressure stems from cashflow, which is going to get increasingly strained in the future. For example, from July 2026 businesses will be required to pay superannuation guarantee charges at the same time as wages—making an additional 12% on top of wage payments every cycle.
The best thing a small business owner can do is actively engage in communication with their tax accountant. Ongoing discussions with an advisor can identify where the business’ pain points are, call out issues before they become problems, and ensure they receive the right guidance and advice on how to manage these for the future.
A good advisor can help with cashflow planning, facilitate discussions with third parties into alternative finance, and engage earlier with the ATO to start negotiations around any need for payment plans. If cashflow is tight they may also explore alternative sources of working capital financing, such as trade or debtor finance options—essentially identifying ways to improve the business’ cash flow, while empowering them to meet ongoing obligations and minimise impact on profitability.
AR & B Advisors provide comprehensive tax advice and support to help small businesses build a strong future
The ATO crackdown has put small business tax process front and centre, with the strict policy adjustment in place to guide businesses in doing the right thing. By their people, and by the tax office.
And with the right framework in place, it’s certainly achievable. It just takes planning.
From managing small business tax debt to ensure you remain on the right side of your ATO obligations, to a virtual CFO service that provides ongoing business management advice to help drive sustainable growth, AR&B Advisors partner with you to support your operations. Contact our expert tax accountants today to discuss how a tailored tax strategy can help create a business that’s ready for the future.
Our CFO service offers business management advice to uncover what’s going on in your business, and help you make more informed decisions to drive business growth.