Small-Business Cash-Flow Playbook 2025
- Written by David Warburton
An educational guide to managing ATO debt, real-time super and growth finance in Australia’s new landscape
Why ATO debt just became the most expensive money you can borrow
Before the pandemic the Australian Taxation Office held about $26 billion in unpaid tax. Today the figure has doubled to roughly $52 billion, and two-thirds of that sits with small businesses. A recent briefing confirms the policy response: from 1 July 2025 the interest the ATO charges on overdue amounts—now hovering around eleven per cent and compounding daily—will no longer be tax-deductible.Losing the deduction pushes the after-tax cost of ATO debt above most unsecured loans and bank overdrafts. Treating the Office as a handy “lender of last resort” is therefore no longer viable; every month a balance lingers it drains working capital faster than commercial alternatives. At the same time, the ATO is tightening payment-plan approvals and has restarted firm collection activity, including director-penalty notices that give company directors twenty-one days to clear certain liabilities or risk personal exposure.
1. Lodgement discipline is step one
The ATO separates lodging on time from paying on time. Staying current with Business Activity Statements, income-tax returns and super-annuation reports signals good faith even if you cannot pay immediately. Businesses that lodge late and pay late face far harsher treatment, so the first practical move is to clear any paperwork backlog and keep it clear.
2. Structuring a payment plan that actually sticks
When cash is tight, an ATO instalment arrangement can still be a useful bridge, but the bar has risen. Officers now expect a detailed cash-flow projection that proves the agreed schedule is realistic. Missing a single instalment can cancel the plan and trigger full collection. Owners who forecast weekly or fortnightly inflows and outflows—rather than relying on monthly averages—tend to win approval and keep it.
3. Comparing refinance options to the new benchmark
Once the deduction disappears, a twelve-month unsecured business loan at nineteen per cent may net out cheaper than keeping an ATO balance, because commercial interest remains deductible. Several mainstream lenders are already piloting products that explicitly refinance tax arrears, provided lodgements are up to date and serviceability is clear. A broker can model different scenarios so you can weigh cash impact, security requirements and total interest paid
4. Planning for real-time super contributions
Legislation already passed will require superannuation guarantee to be remitted at the same time as each wage run from 1 July 2026. Industry advisers warn that weekly payrolls will now mean weekly super payments, shrinking the float business owners once enjoyed. The smartest move is to switch to monthly payments now, test the impact on cash flow and consider whether a fortnightly pay cycle would balance employee expectations and working-capital needs.
5. Keeping money moving in, not just out
The easiest way to miss a tax instalment is to let customers pay late. Interviews with finance coaches and credit analysts show three habits that consistently shorten debtor days:
Clear, short payment terms so clients cannot plead ignorance.
Automated email or SMS reminders that fire before the due date.
A strict rule that repeat offenders move to deposits or upfront payment.
Firms that embed these disciplines see their average collection lag fall below ten days and rarely need external debt collectors.
6. Extending supplier terms—the free working-capital lever
While chasing faster customer payments, you can buy time on the other side of the ledger. Many large suppliers are open to stretching trade terms from thirty to forty-five days for reliable purchasers, especially when presented with a short track record of on-time payments and a concise request outlining proposed volumes. That extra fortnight carries zero interest cost and can fund an entire BAS cycle.
7. Using equipment finance without crippling cash
Supply-chain delays mean a ute ordered today could arrive next winter; heavier machinery can take even longer. Equipment-finance specialists now coach clients to map every planned purchase over the coming twelve months and pre-approve facilities that activate as each item ships. Early discussion also lets you choose the right documentation path:
Low-doc if the business is older than two years, GST-registered and buying a mainstream asset;
Mid-doc when trading history is shorter or the asset is mildly specialised;
Full-doc only when the rate saving outweighs the extra paperwork requirement.
Align the loan term with the equipment’s useful life, and remember that a lease or hire-purchase spreads GST and tax effects differently from a chattel mortgage; your accountant can guide the choice.
8. Freeing cash locked in existing gear
Asset refinancing—selling equipment to a lender and leasing it back—can unlock equity without disturbing operations. It costs more than a straight amortising loan but may be justified when a new contract demands cash for materials now and the alternative is an ATO balance at non-deductible rates. Always compare effective rates and exit fees before committing.
9. Building the twelve-month road map
July to September this year is for housekeeping: bring lodgements current, run a line-by-line forecast of ATO liabilities into next July, and open dialogue on longer trade credit. Spring is the window to embed automated debtor reminders and, if margins can cope, introduce small late-payment surcharges. Over summer, finalise any tax-debt refinance or formal payment plan so instalments begin by March. The final quarter becomes a fire-drill: double-check that no fresh liabilities will roll past 1 July 2025 and rehearse the cash-flow impact of pay-day super contributions. Completing these steps sequentially means the deadline arrives as a planned transition rather than an emergency.
10. Contingency planning if cash flow still falls short
Even a well-built forecast can be derailed by sudden revenue shocks. In that situation, the Corporations Act now offers a streamlined Small Business Restructuring process that keeps owners in control while freezing unsecured debts and proposing a compromise to creditors. The ATO is the decisive vote in most of these restructures and currently supports the majority of well-reasoned proposals. Exploring this avenue early preserves options that disappear once a winding-up notice arrives.
11. Pulling it all together
Three truths define the year ahead:
1. ATO interest is about to become a penalty rate rather than a manageable cost.
2. Real-time super will reduce the float that once cushioned weekly or fortnightly wages.
3. Supply-chain delays and higher borrowing standards make “just-in-time” finance risky.
For a small business the antidote is discipline: lodge on time, forecast cash realistically, collect revenue fast, negotiate supplier breathing space, finance growth assets early and refinance any lingering tax debt before the deduction vanishes. Owners who treat those tasks as part of monthly management—not crisis response—will discover that 1 July 2025 is simply another date in the diary, not the start of a cash-flow cliff.
Bio: David Warburton is a Bacchus Marsh finance broker and small‑business owner. Ratechallenge.com.au
