Running a business has a lot of different aspects that need constant attention. Compliance, coordinating drivers, managing expenses, recruitment. Especially tax. It’s all a lot, and if it was easy, everyone would do it.
Nowadays, owner operators and business leaders need their finger on the pulse with any changes being implemented by the Australian Taxation Office (ATO) and various governing bodies that directly impact businesses. Throw in the ongoing challenging trading conditions that have occurred since the COVID pandemic and there’s plenty for operators to worry about.
With unpaid ATO debt in the small medium enterprise (SME) space now starting to grow at an “alarming rate”, Chevron Equipment Finance (CEF) partner and Queensland assistant finance manager Keith Clearihan says many businesses are doing their best to chip away at their outstanding ATO obligations. Despite this, there appears to be no end in sight.
“The unfortunate thing is the government is getting more aggressive in their efforts to recoup unpaid amounts from businesses with higher interest penalties and even defaulting a business on their company credit file,” Keith told OwnerDriver.
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“This results in the government disqualifying them from further lending to grow their business.”
He says the ATO is stepping up compliance measures, with stronger enforcement targeting underreporting, overclaimed deductions and poor separation of personal and business finances. From CEF’s perspective, businesses with outstanding debts should also be aware of the ATO’s renewed push to recover over $15 billion in historic debts, including those previously placed on hold.
As was first published on The Guardian last year, this tax office plan may involve withholding future refunds to settle old liabilities, impacting as many as 1.8 million individuals and entities in Australia.
“As we are aware, the ATO applies interest on any outstanding unpaid obligations and, from July 1, 2025, Australian SMEs will no longer be able to claim tax deductions on interest charges for overdue tax debts, such as the General Interest Charge (GIC) and Shortfall Interest Charge (SIC),” Keith says.
“This change increases the cost of carrying tax debt, making it more important for businesses to stay on top of their tax obligations.”
Another issue that arises is the big banks’ aversion to funding businesses with ATO debt. For many businesses, Keith says it can feel as though there is no light at the end of the tunnel and that they are forced into second tier lending and paying more than they need to.
“The good news is that there are options available to help with a small shift in perspective,” he says.
“Many business owners don’t realise they can unlock equity in unencumbered assets like trucks and trailers within the business to solve this problem. By raising capital on the asset, you convert the locked up equity into cash to pay off the ATO debt.”
He says the big benefits of this are “the tax man is off your back” and a business’ ATO obligations are paid in full. On top of this, a secured loan isn’t condensed into one or two years with huge monthly payments, which is what the ATO prefers. Instead, a business’ secured loan is structured over a term more suitable to cashflow needs, meaning operators can once again become eligible for big bank funding.
In addition to this, Keith says due to it being an equipment finance loan, businesses can also use the interest paid as a tax deduction to further offset their tax liability for the year. All of these little boosts are part of CEF’s focus on transport businesses around Australia.
“We are experts in complex and challenging scenarios,” Keith says.
“If you currently have an ATO debt that needs to be addressed leading into the end of financial year, which is fast approaching, please reach out to the team for a chat about how we can help you save thousands of dollars.”
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