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Australian small- to medium-sized enterprises (SMEs) are preparing for a tightening financial squeeze as sweeping new payroll and tax legislation is set to roll out over the next two years.
These changes will require SMEs to overhaul their financial and administrative processes to stay compliant while navigating heightened pressure on cash flow.
Earlypay CEO James Beeson said: “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. Many businesses will need to rethink their finance strategies.”
From 1 July 2025, the superannuation guarantee (SG) rate will rise from 11.5 per cent to 12 per cent, directly increasing employer payroll expenses.
Businesses will need to review employee contracts to determine whether superannuation is included in salaries or must be paid in addition. Missing payment deadlines could result in the superannuation guarantee charge, which is not tax-deductible and will further strain finances.
In addition, businesses will no longer be able to claim deductions for the Australian Taxation Office’s general interest charge or shortfall interest charge. While these charges are currently tax-deductible, the reform seeks to deter late tax payments by removing that benefit, making overdue liabilities more expensive for SMEs.
From 1 July 2026, employers will also be required to comply with payday super, meaning superannuation contributions must be paid every wage cycle rather than quarterly. This will necessitate having sufficient funds on hand more frequently. As late payments are not tax-deductible, the change could significantly impact cash flow.
Compounding this, the closure of the Small Business Superannuation Clearing House will force SMEs to adopt paid alternatives such as Xero or MYOB for processing super payments.
“SMEs need to act now to stay ahead of the changes and set themselves up for success,” said Beeson.
He recommended businesses review budgets and payroll frameworks in light of the SG increase and tax changes, ensure payroll systems can accommodate more frequent super payments, and explore new super payment platforms before the ATO service closure.
For those seeking to safeguard cash flow, invoice finance presents a flexible funding solution. This form of finance unlocks working capital tied up in unpaid invoices, allowing businesses to access funds without relying on traditional bank loans, which often require real estate as collateral.
“Invoice financing smooths cash flow, enabling businesses to pay staff, suppliers, and invest in growth – all without relying on their personal assets like the family home,” said Beeson.
Earlypay’s integration with platforms like Xero and MYOB also allows businesses to more easily access financing, helping them stay resilient amid these upcoming reforms.
[RELATED: SMEs urged to understand new ATO rules]
