The 1st of July marks the start of a new financial year and a bit of a reset for your business.
It’s a good time to take a breath, look back at the last 12 months, and think about what you want to do differently (or better) this year. That might be getting on top of cash flow, tightening up your systems, or dealing with anything that’s been sitting in the background a bit too long.
In this month’s newsletter, we’re shining a light on one of those easy-to-ignore areas: ATO debt and how quickly it can grow with interest.
A little bit of focus now can save a lot of stress (and money) later.
Why Small Businesses Shouldn’t Sit on ATO Debt
From 1 July 2026, the ATO’s General Interest Charge (GIC) is 11.43% p.a., and it compounds daily.
For small business owners, that’s a big deal.
This isn’t like a typical bank loan. The rate is deliberately high and keeps compounding every day your balance remains unpaid. Left alone, even a modest tax debt can grow quickly and quietly.
Here’s what that means in practice:
- 11.43% + daily compounding — your debt accelerates faster than most business finance
- No tax deduction — GIC is no longer deductible from 1 July 2025, increasing the real cost
- Applies broadly — BAS, PAYG, income tax — it all attracts GIC once overdue
The takeaway: ATO debt is often one of the most expensive liabilities a small business can carry.
Even if you can’t clear it in full, acting early by making partial payments or setting up a plan can significantly reduce the interest blowout.
Doing nothing is the costliest option.
An Even Bigger Risk: Your Customers’ ATO Debt
Thankfully, very few of our clients are in this position. My bigger concern is the businesses they trade with.
The ATO is taking a much more proactive approach to recovering tax debts, and we’re seeing more businesses being wound up as a result.
That raises an important question: Are any of your customers in this position? If they owe you money and they’re also behind with the ATO, what are your chances of recovering your debt if they fail?
Now is the time to be proactive with debt collection. If customers are paying slowly, don’t assume they’ll catch up eventually. Follow up overdue accounts, review your credit limits, and don’t let debts continue to grow unchecked.
I’ve had several professionals across different industries say the same thing recently: they believe a recession is coming. Whether they’re right or not, tightening up your credit control and following up overdue accounts isn’t just good business practice; it’s one of the best ways to protect your cash flow.
Quick Tip: Start FY2027 With One Small Win
When everything feels important, urgent or overwhelming, zoom out and ask yourself: what’s one thing I could move forward this week?
It might be reviewing your pricing, getting clear on where your profit is coming from or finally tidying up a process that’s been bothering you. Small actions, done intentionally, create momentum, and momentum is what moves a business forward.
You don’t need to solve everything at once. You just need to start.
If you would like to discuss your position or have any questions about ATO debt, please don’t hesitate to get in touch. We’re here to help.