The second half of 2025 is shaping up to be a challenging period for small business. Between rising costs, tighter ATO oversight, and evolving technology, it’s never been more important to stay informed — and act early.

Here’s what’s on the radar right now.

1. ATO Compliance Hotspots

The Australian Taxation Office has stepped up its audit activity, with several focus areas that could directly affect businesses:

• Mixing business and personal finances — drawing on business accounts for personal expenses, without proper controls in place, can trigger red flags.
• Incorrect deductions — claiming expenses that aren’t directly related to business activities.
• Misuse of small business concessions, including the CGT concessions.
• GST non-compliance — particularly in ride-sourcing, taxi, and limousine sectors.
• Omitted contractor income — the ATO’s data-matching programs are becoming increasingly sophisticated.

From 1 April 2025, businesses with ongoing GST compliance issues could be forced into monthly reporting, increasing admin time and costs.

Tip: Review your record-keeping systems and ensure business and personal transactions remain clearly separate; and keep up to date with compliance obligations.

2. Interest on ATO Debts — No Longer Deductible

As of 1 July 2025, interest charged on overdue ATO debts can no longer be claimed as a tax deduction.

• With the general interest charge currently around 10.78% for small businesses, unpaid debts can quickly snowball.
• This change means paying tax late will cost more than ever before.

Tip: If you’re behind on ATO payments, consider restructuring cash flow or refinancing to a lower rate before interest costs escalate.

3. Cash Flow Pressures & Late Payments

Late customer payments are costing Australian small businesses an estimated $1.1 billion annually in lost productivity and extra financing costs.

• New technology integrations — such as Zip, Xero, and Stripe — now allow “buy now, pay later” options for invoices, giving customers flexibility while improving your payment speed.

Small businesses should also consider engaging external resources to assist in debt collection for debts of a sizable nature.

Tip: Review your payment terms and consider using new payment solutions to get funds in faster.

4. Policy Watch

The 2025–26 Federal Budget offered limited direct relief for small businesses. However, the upcoming economic reform roundtable (19–21 August) will explore deregulation and productivity improvements — both of which could impact small business operations in the medium term.

We’ll keep you updated on any relevant outcomes.

5. Cybersecurity Risks on the Rise

Small businesses remain prime targets for cybercrime, with phishing scams, invoice fraud, and ransomware attacks on the rise.

• Affordable AI-driven security tools are becoming available and can be a cost-effective way to protect your business data.

Tip: Include cybersecurity in your annual budget and consider staff training to prevent common attacks.

The business environment is shifting quickly. Staying on top of ATO requirements, protecting your cash flow, and investing in digital security can make a big difference in keeping your business strong and resilient.

If you’d like to discuss how any of these changes affect your business — or to review your tax and cash flow strategy — our business services team is here to help.

Top 5 Quick Actions for Small Businesses

1. Keep business and personal expenses completely separate.
2. Double-check all deductions to ensure they meet ATO rules.
3. Pay ATO debts promptly to avoid high interest costs.
4. Consider new payment solutions to speed up cash flow.
5. Budget for cybersecurity tools and staff training.