Small and medium enterprises (SMEs) in Australia frequently face challenging decisions—whether it’s pursuing overdue invoices, managing payroll, or keeping the lights on in a rented storefront. However, as the february 28, 2025 deadline for FY23-24 business tax returns approaches, a new pressure is emerging: tax liabilities.
For numerous SMEs, the Australian Taxation Office (ATO) is not merely a bureaucratic hassle—it represents an impending risk of penalties, interest charges, and credit score impacts. Yet amidst this tension, an unexpected opportunity may be arising within the business landscape—one that could transform a burden into an advantage. It’s not a magic solution but rather a combination of declining rents, falling construction costs, and potential interest rate cuts from the Reserve Bank of Australia (RBA) that could provide SMEs with some relief—if they act swiftly.
the potential benefits
Tax liabilities can substantially impact SMEs at this time.Gus Gilkeson, CEO of Grow capital, cautions that Friday’s deadline is critical. “Postponing yoru return isn’t an option,” he states. “You’ll incur fines and interest charges; the ATO won’t look away.”
The penalties for late lodgments can reach $313 every 28 days up to $1,565 total with annual interest accumulating at 11%. Even worse is the ATO’s intensified collection efforts—including garnishee notices and credit agency reports—which can severely hinder future financing options. “It’s when it happens—not if,” Gilkeson emphasizes. “Don’t ignore it.”
This situation doesn’t necessarily indicate failure. “Perhaps you’ve acquired a business with existing debts or faced cash flow issues due to unpaid invoices or rapid growth,” Gilkeson elaborates. The struggle is real—a café raising prices to cover rent or a tradesperson stretched thin by expansion—but the economic changes Colhoun mentions might alleviate some pressure. If rents stabilize as vacancies increase, SMEs renting commercial properties could save hundreds each month. As an example, a retailer located in Sydney’s inner west might save $500 on rent—funds that could help settle tax obligations. Lower construction costs are also beneficial for businesses expanding operations—like small manufacturers looking to build new facilities. Combine this with potential rate cuts from RBA and financing options become more accessible.
The benefits depend on synchronization between these factors. Colhoun anticipates “two or three rate reductions during this cycle,” which could lower borrowing rates from 7 percent to 6 percent on loans around $50k—a significant annual saving that allows businesses to pay off thier ATO debts directly or set up payment plans without incurring penalties further down the line.
Moving forward
The advice from Gilkeson is straightforward: take action immediately! “Engage with your accountant or financial advisors right away,” he insists.”If you don’t have one already, seek professional assistance.” His strategies for managing tax debts align closely with Colhoun’s predictions:
- Financing: Secure funding to pay off your debt to ATO completely; lower rates make this more feasible—with rates dropping from 6 percent instead of 7 percent on $20k saving about $100 in interest over one year compared to ATO fees.
- Payment Plans: Negotiate terms directly with ATO by outlining expenses and assets available; savings from reduced rent may facilitate monthly payments—such as,$5k over six months becomes manageable if you save an additional $300 through lowered lease costs.
- Deductions: Consider prepaying interest or writing off bad debts even though it’s critically important to note that government policies may soon eliminate deductions for ATO interests—consult professionals before proceeding.
- Dialog: “be proactive,” he advises again.”Inform both your advisors and ATO about what your experiencing now.Openness opens up more options.”
The clock is ticking! The RBA’s quarterly CPI focus—the trimmed mean increased slightly from January’s figure of 2 .8 %to its previous level of </span>. Landlords might resist passing along savings during hot markets while excuses won’t sway the ATO either way.
Though,&amp;amp;amp;aacute;, those who act quickly may find favorable conditions aligning perfectly together.
Picture this scenario: An independent boutique in Melbourne faces tax debt stemming back into FY23-24 while rental prices ease due rising vacancy levels alongside March’s anticipated cut reducing loan expenses—they manage paying their taxes without damaging their credit scores allowing them restock inventory ahead Easter season.
Or consider another case where Perth-based tradespeople utilize saved funds towards prepaying interests freeing up cash flow as borrowing becomes cheaper overall!
This outcome isn’t guaranteed though! Fluctuating prices such as eggs &amp;amp;aacute;, fuel etc., threaten offsetting housing gains while caution exercised by RBA risks delaying any relief measures further down road ahead too… but still there lies unique opportunity presented come year-end period approaching fast enough now!
Colhoun suggests data indicates easing trends occurring where least expected – housing market rather than headlines dominating news cycles – whilst simultaneously translating actionable insights into tangible results via Gus’ guidance here today too!!
Please note data provided herein serves general informational purposes only & does not constitute financial/legal/tax advice whatsoever!
