Australian businesses are bracing for a cash flow crunch as significant new payroll and tax legislation rolls out over the next two years, challenging their resilience and adaptability in an already demanding economic environment.
The changes will force SMEs to adjust their financial and administrative practices in order to remain compliant and put further pressure on their ability to effectively manage their cash flow. Earlypay CEO James Beeson said: “At a time when SMEs are already battling a tight labour market and rising operational costs, these changes will only add more pressure to their cash flow.
“Many businesses will need to rethink their finance strategies,” he said. These reforms, while aimed at improving long-term employee benefits and tax compliance, could stretch SME resources thin, particularly for those with limited financial buffers.
Key changes impacting SME cash flow
From 1 July 2025:
Super Guarantee Increases to 12%
The Superannuation Guarantee (SG) rate will rise from 11.5% to 12%, increasing payroll costs for employers. Businesses must check employee contracts to see if super is included in salaries or needs to be paid on top. Late payments will attract the Superannuation Guarantee Charge (SGC), which is not tax-deductible, adding further financial strain. While this benefits employees’ retirement savings, the downside is it potentially increases payroll expenses for employers. This incremental rise underscores the government’s focus on retirement security, but it may squeeze SMEs already grappling with narrow profit margins.
ATO interest charges no longer tax deductible
New tax laws will remove the ability to claim deductions for General Interest Charge (GIC) and Shortfall Interest Charge (SIC), making overdue tax liabilities even more costly for SMEs. Currently, businesses can claim these interest charges as tax deductions, but the proposed change aims to remove this benefit, making overdue tax liabilities more costly for SMEs in an attempt to further discourage late tax liability payments. This shift could disproportionately affect businesses with seasonal cash flows or unexpected delays in revenue.
From 1 July 2026:
Payday super introduced
Superannuation contributions will need to be paid with every wage cycle instead of quarterly, requiring businesses to have funds available more frequently. Late super payments are not tax-deductible, intensifying cash flow pressure. Payday super was announced as part of the 2023-24 Federal Budget and is yet to be legislated. This change aligns super payments with modern payroll expectations but demands greater liquidity from SMEs, potentially disrupting their financial planning.
ALSO READ: Payday Super: Can SMEs handle the seven-day squeeze?
ATO’s free clearing house to close
The shutdown of the Small Business Superannuation Clearing House (SBSCH) means SMEs will need to find and pay for alternative platforms, such as Xero or MYOB, to process super payments. This added cost and administrative burden could strain smaller operators unaccustomed to third-party systems, pushing them to invest in new technology or services.
Preparing for the changes
“SMEs need to act now to stay ahead of the changes and set themselves up for success,” Mr Beeson said. Proactive preparation is critical to weathering these reforms. To help navigate these shifts, SMEs should:
- Review budgets and payroll structures to account for increased SG rates and tax law changes, ensuring they can absorb the additional costs without compromising operations.
- Ensure payroll systems can handle more frequent super payments, upgrading software or processes as needed for seamless compliance.
- Explore alternative superannuation payment platforms before the SBSCH closure, comparing options to find cost-effective and reliable solutions.
- Consider invoice finance to maintain steady cash flow and meet payroll and superannuation obligations, providing a flexible lifeline during this transition.
For businesses concerned about managing cash flow through these changes, invoice finance can provide access to working capital by unlocking funds tied up in unpaid invoices. Invoice financing allows SMEs to secure funding against the value of their outstanding invoices, providing a much-needed alternative to traditional bank loans that often require real estate as collateral.
“Invoice financing smooths cash flow, enabling businesses to pay staff, suppliers, and invest in growth – all without relying on their personal assets like the family home,” Mr. Beeson said. This approach offers SMEs a practical tool to maintain liquidity, especially as payment cycles and regulatory demands tighten.
Earlypay also integrates with platforms like Xero and MYOB, streamlining access to funds for SMEs. It’s invoice finance helps SMEs bridge the cash flow gap between issuing invoices and receiving payment from customers by providing early payment of unpaid invoices. Earlypay also provides equipment finance to SMEs to assist with capital expenditure, offering a dual solution for operational and growth needs.
The information provided is for informational purposes only and should not be construed as financial advice.
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