Tax update September 2025

What’s changing?

While sweeping tax reforms aren’t expected this year, several targeted changes could affect your bottom line.

Tax debt no longer deductible

The ATO is reminding taxpayers the general interest charge (GIC) applied on an unpaid amount of tax or other liabilities after the due date is no longer tax deductible.ⁱ

The current rate applied to GIC debts is 11.17 per cent, with the interest charge compounding daily.

Prior to 1 July 2025, GIC could be claimed as a deduction in your tax return, but with the deduction no longer available, small businesses carrying any tax debts will now pay more.

Back pay reporting change

From the start of the 2025-26 tax year, the way that back payments to employees are treated and reported has changed.ⁱⁱ

In previous tax years, back payments accrued more than 12 months prior and exceeding $1,200 were reported at Lump Sum E in Single Touch Payroll (STP) reports.

The $1,200 threshold has now been removed, so all back payments accrued more than 12 months ago must be reported regardless of the amount.

Small Business Clearing House to close

The ATO’s Small Business Clearing House (SBCH) will shut down ahead of the new Payday Super regime launching 1 July 2026.ⁱⁱⁱ

Small businesses with 19 or fewer employees could use the SBCH to pay their quarterly super contributions to the super funds selected by eligible employees.

The ATO says it will provide information to small businesses about transitioning to alternative super payment services, but businesses are being encouraged to take steps towards changing their payment arrangements before 1 July 2026.

Support for new small businesses

The ATO is providing extra support for new small business owners to help them understand and comply with their tax, super and registry obligations.

With around 50 per cent of businesses failing in their first three years, the new Ready for Business Program is designed to help owners get their ATO obligations correct from the start.

ABN holders will receive a series of emails with tips on their ABN obligations, business structure, registering for GST and employer responsibilities.

Focus on GST compliance

The ATO is also encouraging small businesses to set aside their GST payments in a separate bank account to avoid being caught out when it comes time to pay their obligations.^iv

Compliance with GST registration and payment obligations remain an ongoing concern for the regulator, with the current annual tax gap estimated to be around $8 billion.

GST registration is compulsory when turnover exceeds $75,000 or if a business provides taxi, limousine or ride-sourcing services.

Notifying SMSF changes

SMSF trustees are being urged to ensure they notify the ATO whenever modifications are made to their SMSF.

Changes related to the fund’s contact details, structure, status or bank account must all be submitted to the regulator within 28 days.

Once the ATO receives the change details, the regulator will send an alert vis SMS or email to safeguard the SMSF against potential fraud or misconduct.

Work-related deductions continue to grow

Release of the annual Taxation Statistics Report for 2022-23 shows work-related expenses continue to dominate the tax deductions claimed by individuals, ensuring the ATO will maintain its current focus on this area.

Work-related expenses accounted for 50 per cent of individual deduction claims, with 10.3 million Australian taxpayers claiming an average of $2,739 per person in 2022-23.

Need help navigating the changes?

If any of these updates affect your business or personal tax situation, please contact us for help to understand your obligations, adjust your reporting processes and to plan ahead.

i ATO reminder on interest deductibility changes from 1 July | Australian Taxation Office

ii The way you treat and report back payments is changing | Australian Taxation Office

iii Small Business Superannuation Clearing House | Australian Taxation Office

iv ATO announces additional support for new small business owners | Australian Taxation Office

Succession planning that honours the business you built

For many small business owners, the company they’ve built is more than a livelihood, it’s a legacy. Building a successful business takes years of hard work and dedication and when you’re ready to retire or move on to the next chapter of your life, the path isn’t always clear. That’s where succession planning comes in.

Whether your children have chosen different careers or there’s no obvious successor in sight, succession planning can be one of the most emotionally and financially complex aspects of running a business.

Recent Australian research shows that most small businesses won’t be passed on to the next generation. In fact, nearly half of SME owners expect that when they retire it will result in the closure of the business or selling to someone outside the family.ⁱ

Only 39 per cent anticipate a family member taking over, and just one-third have a documented succession plan in place.

Without a clear plan, many business owners find themselves working well past the traditional retirement age. The reasons vary from lack of interest from family, uncertainty about valuation or simply not knowing where to start and the consequences can be significant.

Who will take over your business?

Succession planning isn’t just about protecting financial outcomes; it’s also about preserving relationships. When expectations are unclear or decisions are made under pressure, family dynamics can suffer. Open conversations, guided by a shared vision and professional advice, can help avoid misunderstandings and make sure that everyone feels heard. Even if the next generation isn’t stepping in, a thoughtful plan can honour your legacy and reduce stress for those around you.

A plan also helps the business operate without disruption during change, which is vital for employees, customers, and stakeholders alike.

Start early for a smoother exit

The key to a successful business exit is planning early.

A well-considered succession plan allows you to decide how and when you leave your business, rather than being forced to react to circumstances.

A federal government succession planning template is a helpful starting point, but it’s just one piece of the puzzle.

Planning ahead also helps avoid complications with the Australian Taxation Office. Transferring control or assets within a family business can trigger tax consequences, especially if the structure isn’t reviewed in advance.

A strong succession plan should cover:

• whether you’ll retain any ownership or involvement post-transition

• how the successor will fund the purchase (if applicable)

• contingencies for unplanned events like illness or sudden death

• tax implications of asset transfers, CGT, GST, and restructuring

• a current business valuation and regular reviews

• legal documentation and buy-sell agreements

If your business involves trusts, shareholder loans, or complex structures, it’s particularly important to seek professional advice. The ATO is actively reviewing transactions involving family wealth transfers, internal restructures, and use of concessions so clarity and compliance are key. Transactions of interest include assets being moved around within a private group; family member interests being restructured; accessing of concessions, exemptions and rollovers; settlement of shareholder/associate loans (Division 7A loans); and transfer of wealth through trusts.ⁱⁱ

Get good advice

Succession planning isn’t just about paperwork. Whether you’re preparing your business for sale, transferring ownership to a family member, or simply exploring your options, professional advice can make all the difference.

We can help you to:

• choose the right tax structure

• understand the implications of buy-sell agreements

• maximise available CGT concessions

• prepare your business for valuation and sale

If you’d like to start the conversation or review your existing plan, please contact our office. The earlier you begin, the more choices you’ll have and the more confident you’ll feel about your next chapter of your business.

i Planning for life after business | Business Research and Insights

ii Areas of focus 2024–25 | Australian Taxation Office

Productivity Commission calls for small biz tax reforms

If you’ve ever cursed the red tape wrapped around Aussie business or wished your tax bill was just that little bit smaller, there might be good news coming your way.

The Productivity Commission has just dropped the first of five big reform reports, and it’s calling for a shake-up of Australia’s company tax system and regulation burden. The goal? To give small and mid-sized businesses more breathing room to grow, invest and get back to doing what they do best: building the economy.

A tax cut with cut-through

The draft proposal suggests a major drop in the company tax rate, down to just 20 per cent for businesses with revenue under $1 billion. That’s a big shift from the current setup, where businesses earning under $50 million are taxed at 25 per cent, and those above that threshold cop a 30 per cent hit.

The move could benefit over 1.2 million small companies around the country, potentially unlocking an extra $8 billion in investment and boosting the nation’s economic output by $14 billion. And the Productivity Commission says it won’t cost the Budget a cent in the medium term.

Deputy Chair of the Productivity Commission, Dr Alex Robson says the move is needed to ensure future prosperity.

“If we don’t get our economy moving again, today’s children could be the first generation to not be better off than their parents,” says Robson

A new 5 per cent cashflow tax

The Commission’s also throwing a new idea into the mix: a 5 per cent net cashflow tax that allows businesses to instantly deduct the full cost of investments. Think tech upgrades, tools of the trade or new premises.

This could be a game-changer, especially for newer businesses or those trying to scale up fast. Instead of waiting years to slowly claim depreciation, you get the tax break now, right when you need the cashflow boost most.

It also levels the playing field. Larger, asset-heavy companies making passive profits off existing capital might end up paying more under this model, while growing businesses putting cash back into expansion get a leg up.

Red tape: still the great Aussie handbrake

Beyond tax, the Commission’s sounding the alarm on Australia’s growing “regulation nation” status. From windfarms taking nine years to get approval in NSW to Brisbane cafes needing 31 steps to open their doors, the message is: we’re drowning in paperwork.

“Regulation is important, but over-regulation is a handbrake on growth,” said Commissioner Sterland.
“We need government to cut through the thickets of regulation that are slowing us down.”

Their suggestion? Make growth a priority when writing new rules, hold regulators to account, and empower an independent commissioner to scrutinise the impact of red tape before it’s unleashed.

What does the Treasurer think?

Treasurer Jim Chalmers has welcomed the report, saying it’ll help shape discussions at his upcoming economic reform roundtable in late August. The roundtable, featuring a mix of economists, unions and business leaders, will put tax, productivity, regulation and spending under the microscope.

Chalmers has promised any reform needs to be budget-neutral or better. So don’t expect freewheeling spending. But the appetite for meaningful tax reform seems to be growing.

For now, the Productivity Commission is taking submissions on its draft proposals, so if you’ve got strong feelings about tax rates or the pain of permits, this is your chance to have a say.

The impact on small business

If you’re a small or growing business, these proposed changes could free up cash to invest in your future. Lower tax rates and streamlined regulation could make a real-world difference. While we’ve heard plenty of talk about productivity over the years, this feels like a shift toward practical, founder-friendly action. Let’s hope the policymakers are listening.

Source: Flying Solo August 2025
This article by Cec Busby is reproduced with the permission of Flying Solo – Australia’s micro business community. Find out more and join over 100K others https://www.flyingsolo.com.au/join.
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