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From 1 July 2025, the Australian Taxation Office (ATO) is implementing changes to income tax deductions.
Taxpayers will no longer be able to claim an income tax deduction for ATO interest charges.
This will place added pressure on Aussie SMEs. Pepper Money’s head of mortgages Siobhan Williams said brokers should be proactive in communicating these changes with clients.
There are options that can make the transition easier for SME owners. Consolidating ATO debt and claiming deductions can help reduce the burden.
“These changes have left many business owners worried about their financial future. As tax pressures mount, it is crucial for brokers to proactively support their business clients and educate them on the options available to help manage their obligations,” Williams said.
“Many business owners are feeling the squeeze with the ATO ramping up its collection efforts. But it’s good to know that there are solutions available. We offer a range of flexible commercial lending options designed specifically for SMEs to help them refinance existing debts, manage ATO liabilities, or consolidate other financial obligations.”
Refinancing debt could be a worthwhile option for affected SMEs.
“This includes offering higher loan-to-value ratios (LVRs) and providing alternative assessments of business income and assets. These flexible criteria can enable business owners to secure finance when traditional lenders are unable to meet this need,” Williams said.
“To us, it’s key to look at a business’s overall financial health rather than just the numbers on paper. This allows us to offer higher LVRs for commercial loans, which is particularly helpful when businesses are dealing with ATO debts or other financial obligations. We work with SMEs to understand their situation and create solutions that give them the breathing room they need while positioning them for future growth.”
General interest charge (GIC) and the shortfall interest charge (SIC) incurred before 1 July will not be impacted by the changes.
Further to the tax deduction changes, 1 July 2025 will also see the superannuation guarantee rate rise from 11.5 per cent to 12 per cent.
Williams urged brokers to collaborate with accountants to identify and resolve pain points for clients.
“Brokers have an opportunity to get on the front foot and encourage their business clients to act now before the change takes effect 1 July,” she said.
“Together with a tax professional, help your clients navigate whether paying off tax debt with a loan is appropriate for their situation. Find a lender with loan options that allow customers to consolidate their ATO debt, enabling them to potentially place the debt on their balance sheet and claim deductions.”
[Related: SMEs face rising strain from super and tax changes]
