ATO and their Small Business Initiatives

Several key updates have been announced by the Australian Taxation Office (ATO) this May that will affect small businesses across the country. These updates include extended tax concessions, new incentives for energy-efficient investments, and changes to GST reporting obligations. Understanding these changes can help small business owners make informed decisions before the end of the financial year and beyond. Here's a breakdown of the most relevant updates and what they mean for small business operations.

1. $20,000 Instant Asset Write-Off Extended
The $20,000 instant asset write-off has been extended through to 30 June 2025. This allows eligible small businesses to immediately deduct the full cost of eligible depreciating assets costing less than $20,000. To qualify, the business must have an aggregated annual turnover of less than $10 million, and the asset must be first used or installed ready for use between 1 July 2024 and 30 June 2025.
This measure continues to be a valuable tool for small businesses that need to invest in equipment, tools, vehicles, or technology. Rather than depreciating the asset over several years, the entire cost can be written off in the year it was installed or used. This boosts cash flow and reduces taxable income, making it a strategic option for businesses planning purchases in the next financial year. However, each asset must be under the $20,000 threshold individually to qualify, and assets over that amount will be subject to general depreciation rules.
 
2. ATO to Deny Tax Deductions for Interest on Tax Debts
The Australian Taxation Office (ATO) is set to introduce a new measure that could have significant implications for businesses with outstanding tax debts. From 1 July 2025, businesses will no longer be able to claim a tax deduction for interest charges applied by the ATO. This change applies to both the General Interest Charge (GIC) and the Shortfall Interest Charge (SIC), which are commonly incurred when tax payments are late or when there is a shortfall in the amount paid. While these charges were previously deductible, allowing businesses to reduce their taxable income, that benefit will soon be removed.
The shift appears to be part of a broader strategy to encourage more timely payment of tax debts. By making the financial consequences of late payment more costly, the ATO is encouraging businesses to settle their obligations more promptly and avoid accruing unnecessary interest. Businesses should take this opportunity to review their current tax debt positions and consider the potential impact this change may have on their cash flow and tax planning strategies.

3. Small Business Income Tax Offset
The Small Business Income Tax Offset continues to provide relief for unincorporated small businesses. This offset can reduce the income tax payable by up to $1,000 per year. It applies to sole traders, as well as individuals who receive net small business income from a partnership or trust, where the business has an aggregated turnover of less than $5 million.
The offset is calculated automatically when lodging a tax return, based on the proportion of business income and the overall taxable income of the individual.
While it doesn’t reduce the tax rate itself, it can provide a modest but valuable reduction in the total tax liability, especially for micro and home-based businesses. It's a good reminder for small business operators to ensure their income is correctly classified as business income and to keep detailed records to support their claims.
 
4. Monthly GST Reporting for Some Businesses
The ATO has started moving certain small businesses from quarterly to monthly GST reporting as of 1 April 2025. This change applies to approximately 3,500 businesses that have shown a history of non-compliance, such as consistently late Business Activity Statement (BAS) lodgements, unpaid GST debts, or incorrect GST reporting. Businesses that are selected will be formally notified by the ATO and will be required to submit and pay GST monthly instead of quarterly.
​The intention behind this shift is to help the ATO monitor at-risk businesses more closely and reduce the likelihood of large tax debts accumulating over time. For businesses affected, this change can increase the frequency and complexity of their reporting obligations and may require adjustments in bookkeeping practices and cash flow planning. It’s important to take proactive steps to stay compliant and up to date with obligations to avoid being selected for monthly reporting. For businesses already affected, automating BAS preparation and improving recordkeeping systems can help manage the extra workload.

These ATO updates reflect a broader focus on compliance, sustainability, and support for business investment. Whether you’re looking to claim deductions, invest in energy-saving equipment, or improve reporting practices, understanding the latest changes can help you make smarter decisions. With the end of financial year approaching, it’s an ideal time to review your current position, plan upcoming purchases, and ensure your business is on track.

If you're unsure how these changes might affect you and your business, get in touch with us either by email at [email protected] or call us at (08) 9367 4199. We can help you understand and ensure you're compliant moving forward.