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ATO changes will make it harder for over 42,000 small businesses.

The ATO reports that more than 42,000 small businesses fail to work with them in regard to finalising their tax obligations.

This means all are risking massive consequences when overdue payment rules change in 2025.

Apparently some 50,000 taxpayers have outstanding tax obligations of over $100,000 and they are ignoring the ATO’s calls to pay up. Of those, slightly more than 42,000 are small businesses and they owe a total of $11 billion.

Of Australia’s $50 billion in collectable debt, 65% is related to small and medium enterprises.

But the ATO is changing its debt repayment rules in 2025 and will increase their efforts to get these debts paid.

Also, the general interest charge (GIC – currently 11.34%.) — the interest tacked onto payments to the ATO will lose tax deductibility status on July 1, 2025. This change is expected to add an extra $500 million a year to the government’s coffers, as the tax office formally abandons the COVID-era leniency it showed taxpayers.

When these ‘disengaged’ small businesses do finally pay, they may well find the amount owed is significantly more than expected after interest is charged. Even for those who ‘self-report’, but understate their tax obligations, will be tracked down and will owe interest on the shortfall as well. Any interest on such shortfalls will also lose tax-deductible status.

According to industry bodies it seems that few taxpayers are currently aware of the impending change.

The appropriate legislation has yet to be drafted but it’s almost certain it will be. Better to ‘clear the decks’ now rather than wait, as things will only get harder for these small businesses.