Why a Cash Flow Crunch is Looming for SMEs

Small and medium-sized businesses are heading into choppier financial waters as a series of law changes take effect from 1 July 2025. With superannuation increases and tax deduction changes on the horizon, now is the time to get ahead of your cash flow strategy.

Super Guarantee Increase = Higher Payroll Costs from 1 July 2025

The Super Guarantee (SG) rate will rise from 11.5% to 12%, increasing employer contributions to staff superannuation. Businesses must check whether these contributions are already included in employee salaries or if they need to be paid on top. If unpaid or paid late, the Super Guarantee Charge (SGC) applies—and it’s not tax-deductible.

This means failing to stay on top of super obligations could lead to higher non-deductible costs and extra pressure on operating budgets.

No More Tax Deductions for ATO Interest

From 1 July 2025, businesses will no longer be able to claim tax deductions for ATO interest charges, including the General Interest Charge (GIC) and Shortfall Interest Charge (SIC).

These changes aim to deter late tax payments—but they also make ATO payment plans a far more expensive option.

If your business is currently on an ATO plan or considering one, it’s worth reassessing your options before these changes come into play.

Payday Super Is Coming in 2026

Looking slightly further ahead, Payday Super—effective from 1 July 2026—will require super to be paid every time wages are processed, rather than quarterly. This shift means SMEs will need to:

• Have funds available more frequently

• Update payroll systems to handle more regular super payments

While this change is still over a year away, forward planning is key.

What Should Businesses Do Now?

With several pressures converging, SME lenders and advisors are encouraging businesses to act early. Here’s how you can prepare:

✅ Review employment contracts – Check if super is included or paid on top

✅ Update payroll systems – Ensure they can handle more frequent super payments

✅ Reassess tax strategies – Understand how the loss of ATO interest deductions affects

your position

✅ Explore funding options – Consider invoice finance or business lines of credit (which remain tax-deductible)

✅ Speak to your accountant or advisor – A proactive approach now could save you from cash flow headaches later

Final Thoughts

With rising compliance costs and changes to tax deductibility rules, many SMEs could find themselves facing a cash flow crunch if they don’t plan ahead. The message from finance providers is clear: don’t wait for 1 July—prepare now.

If you’d like help reviewing your current strategy or exploring funding alternatives, reach out to our team today.