Several changes starting 1 July 2025 could affect your cash flow or force you to review your financing strategies. Are you prepared for them?

Tax deductions for ATO interest charges

After 1 July 2025, you can no longer claim an income tax deduction for the general interest charge (GIC) and the shortfall interest charge (SIC). This means the cost of unpaid tax debt will rise as interest becomes a direct expense.

Jon Sutton, CEO of ScotPac Business Finance, says this change should serve as a wake-up call on the importance of proactive financial management.

“The days of using the Australian Taxation Office (ATO) as a de facto bank through payment plans are coming to an end. While the tax office showed some flexibility during and immediately after the COVID-19 period, it has since returned to more stringent enforcement of tax obligations and there are no signs of it slowing down.”

Sutton says small-to-medium enterprises (SMEs) should consider alternative finance options including business loans, invoice financing or equipment refinancing options.

These retain their tax deductibility and often come with more competitive interest rates and longer repayment terms than the ATO offers, he says.

The GIC is worked out daily on a compounding basis. It may be applied if a tax or some other liability remains unpaid after the date it should have been paid. This includes where there is a tax shortfall because of an amendment or correction or if an instalment of tax is underestimated or a return is lodged late.

If your tax return is amended and there is a tax shortfall, the ATO will apply SIC rather than GIC. This is because taxpayers are usually unaware of a shortfall amount until they receive an amended assessment.

The SIC is applied to the tax shortfall amount for the period between when it would have been due and when the assessment is corrected.

Any GIC or SIC incurred before 1 July 2025 is not affected by the changes and will continue to be deductible for the 2024/25 and earlier income years.

Superannuation Guarantee rate

The Superannuation Guarantee (SG) rate will rise from 11.5% to 12%, increasing payroll costs.

According to the Australian Taxation Office (ATO), the new rate must be applied for all salary and wages paid on and after 1 July 2025, even if some, or all, of the pay period it relates to is before 1 July 2025.

The ATO says you should ensure you pay the SG in full, on time and to the right fund to avoid penalties and interest. Also, allow extra time for the payments to reach your employees’ super funds if you’re using a clearing house. Payments are only considered “paid” when they are in employees’ super accounts.

Changes to your PAYG withholding cycle

The ATO will have notified you in April if your pay-as-you-go (PAYG) withholding cycle will change from 1 July. It makes this decision based on whether your annual withholding payments have increased. If they have, your reporting and payment obligations may change, affecting your cash flow.

Where your annual withholding amount is between $25,000 and $1 million, you must report on your activity statement and pay monthly.

If the amount is over $1 million, you will be required to pay electronically within six to eight days from the day you withheld the amount, such as when you pay staff.

If your withholding status is changing, you should make changes to your payroll software before 1 July to align your withholding reporting and payments with the new due dates.

You can ask to stay on your existing cycle if you estimate your 2025/26 PAYG withholding amount will be less than the relevant threshold.

Energy bill relief

There’s a small bit of good news. The federal government will extend energy bill rebates valued at $150 to around one million small businesses from 1 July.

Small businesses must meet their state and territory definition of electricity “small customer”, as determined by their annual electricity consumption threshold, to be eligible for the rebate. Most eligible businesses will receive their energy rebate automatically and won’t be required to take any further action.

Summary

From rising super contributions to changes in tax deductibility and PAYG cycles, the new financial year brings a range of regulatory shifts that could impact your bottom line. Now is the time to review your finance and payroll systems, assess your working capital needs, and take proactive steps to stay ahead. If you’re unsure how these changes could affect your business, speak to a lending specialist or your accountant to put the right plans in place.