ATO Debt and Planning for Success: Why Small Businesses Need to Act Now

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ByWild Orange Strategies
ATO-debt-and-planning

Another financial year is almost behind us (where did that time go?), and while you might be busy squeezing the last drops out of 2024/2025, we’re here to remind you: now is the time to set yourself up for success in 2025/2026, especially if you are a business currently paying off ATO debt.

We know — your to-do list is longer than a Bunnings sausage line on a Saturday morning and ATO debt and political reforms are the last thing you want to think about. But keeping your head in the sand, isn’t going to help! So, grab a cuppa (or something stronger — we won’t judge) and let’s talk ATO debt, Labour’s landslide win last month, and what this all means for small businesses like yours.

1. Labour’s Landslide: What It Means for Small Business

Labour’s landslide win last month isn’t all champagne and celebrations for small business owners. Here’s the short version:

Instant Asset Write-Off

There’s been talk of extending the instant asset write-off until 30 June 2026, but as of today, it officially ends on 1 July 2025.
Thinking about a new work vehicle, equipment upgrade, or fancy new printer for the office? Now’s the time to seriously consider it. This month might be your best shot to maximise the deduction under current rules. Better safe than sorry.

Industrial Relations Reforms

Labour is removing the ban on non-compete clauses for employees earning under $175,000. What does this mean for you? Your top sales rep could walk out Friday and start competing against you Monday, either working for another company or by starting their own.
Investing in strong culture, competitive benefits, and genuine loyalty programs is no longer optional — it’s survival. It’s time to review your working environment and guess what – you need cashflow to help!

And the biggest change of all…

2. Interest on ATO Debt is NO longer tax deductible 

One of the biggest changes coming under Labour is this:
From 1 July, interest charged on ATO debt will no longer be tax-deductible.

What does that mean for small businesses?
Let’s take Rodney as an example:
He owes $20,000 to the ATO, currently attracting 11.17% interest, which he can deduct on his tax return. But after 1 July, that 11.17% interest — without the tax benefit — will feel more like paying 18% interest due to compounding. That’s higher than some credit cards! Ouch!!

If your business has ATO debt, this is the month to get a plan in place:

  • Consider refinancing or find alternative lending options (a great broker could help here)
  • Reassess your cashflow and repayment strategy
  • If your debt exceeds $100,000, you may even want to explore business restructuring – speak to your Accountant ASAP.

So, why are they doing this? Our assumption is so that businesses stop treating the ATO like an interest-free bank. While this move seems like a push to deter ‘borrowing’ from the ATO — from where we sit, it feels less like tax reform and more like extreme pressure on small business. Is this the beginning of the extreme wealth tax? Where’s the line? We’re not happy about this reform but unfortunately, we still need to comply with the ATO and so do you.

3. With All The Changes, It’s Time to Plan for 2025/2026

We get it. You’re busy. But if you leave planning until June 29, you’re doing your future self no favours, and your Accountant won’t be happy with you!

Now is the golden window to:

  • Review your cashflow
  • Plan your purchases
  • Finalise jobs and invoices
  • Sort your super contributions
  • Write off bad debts
  • Strategically manage your tax position including any ATO debt.

Good planning now means less tax pain later. Your accountant (and your wallet) will thank you. What do you need to consider at tax time? Check out Tax and Compliance

4. Finish Strong — But Be Smart About It

Got unfinished projects or invoices sitting in draft?
Finishing them now could help boost your cashflow before June 30 — especially if you need the cash to pay bills or keep your operations running smoothly.

BUT — and this is important — it might actually be more beneficial to hold off invoicing until next financial year if you’re teetering on the edge of the next taxable income bracket.

It all comes down to:

  • Do you need the money now?
  • Or do you need to reduce your taxable income more?

There’s no one-size-fits-all answer — but this is where working with your accountant to model out the options really pays off.

5. Super Contributions: A Smart Move Before EOFY

Paying extra into your (or your team’s) superannuation before June 30 isn’t just a nice-to-have — it can have real tax benefits.
Super contributions can reduce your taxable income and future-proof your retirement (two birds, one stone). Just make sure the contribution clears before the financial year ends to claim the deduction.

6. Prepay, Negotiate or Cancel

Take a look at your regular expenses:

  • Could you prepay insurance or subscriptions and claim the deduction now?
  • Can you renegotiate with suppliers or cancel services you no longer use?
  • Are there costs that could be pushed into the new year — or better yet, cut completely?

A quick review can make a noticeable difference to your tax bill and your ongoing cashflow.

7. Bad Debts: Clean Them Up

The EOFY is a great time to review any outstanding invoices.

  • Can you chase down payment now?
  • Is it time to write off those bad debts and claim the deduction?

Tidy records, clean books, and fewer loose ends — your future self will be grateful.

8. Don’t Skip the Cashflow Review

It doesn’t matter whether you’re a solo operator or a team of 20 — every business should be looking at their cashflow right now.

A good cashflow review will help you answer:
✅ Are we trading profitably or slowly sinking?
✅ Can we cover upcoming costs and tax obligations (including any ATO tax debt)?
✅ What do we need to tweak to stay sustainable into the new financial year?

Knowledge is what helps you move from simply surviving to building a thriving business — one that gives you what you really want: freedom.

Ready to Take Control?

While we’d normally say “talk to your accountant,” this year it’s more like run to your accountant. Because this EOFY isn’t business as usual — there are big changes ahead, and the decisions you make this month could affect your business well into 2026 and beyond.

Plan now. Think ahead. Get on top of it and build a business that creates the future of your dreams, not your nightmares!

At Proactive Accounting, we love helping small businesses not only survive but thrive.
Our team can work with you to:

  • Review your cashflow and budgeting
  • Plan your tax strategy including managing any ATO debt
  • Identify super contributions and prepayments that save you real dollars
  • Help you navigate the new business landscape with confidence

Don’t leave it to the last minute. The earlier you start, the more opportunities you’ll have to save (and let’s face it — tax time is stressful enough without a last-minute panic).

👉 Book your EOFY Planning Session today.

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