Over the next twelve months, Australian businesses will face increasing pressure as the Australian Government, the Australian Taxation Office (ATO), and the Australian Securities and Investments Commission (ASIC) tighten the screws to make it more difficult for businesses to avoid, delay, or restructure out of tax and superannuation obligations and liability for insolvent trading.

The key strategies:

1. The ATO is ramping up collection activity, using AI technology to sharpen its analytics and strengthening its policies for assessing small business restructuring proposals.
2. ASIC has issued an updated regulatory guide concerning directors’ duty to prevent insolvent trading.
3. The government has introduced a reform to make it harder for businesses to claim a tax deduction for the interest that they pay on late payments and underpayments to the ATO. It is also pressing ahead with its goal to reduce the timeframe for employers to pay their employees’ superannuation.

The strategies in more detail

ATO

• The ATO’s increase in collection activity is real and tangible.
  • Its appetite for waiving interest and agreeing to long payment plans has diminished.
  • It is issuing increasing numbers of director-penalty notices and garnishee notices.
  • It is reporting defaults to credit agencies.
  • It is filing more applications to wind up companies.
• The ATO is using real-time data and AI-driven analytics to identify taxpayers who are not lodging returns. This includes single-touch payroll reporting, cross-matching data with financial institutions, and employee tip-offs regarding unpaid superannuation.
• The ATO is adopting a higher level of scrutiny of small business restructuring proposals. It will:
  • More closely scrutinise compliance with tax and superannuation obligations.
  • Require director and related party creditor debts to be included in the restructuring plan. It will not support plans that propose to subordinate any director and related party debts.
  • Not support plans where it considers that the SBR process is being used to circumvent a winding up proceeding or to gain an unfair advantage over other businesses.

Speaking to CPA Australia, Shaun Matthews CPA and Partner at Cor Cordis, shared his insight into the ATO’s more targeted approach to assessing small business restructuring proposals: ‘They’re really looking at the future viability and compliance history of the businesses and making sure that any proposals are in the best interests of all stakeholders.’

ASIC

• ASIC’s updated Regulatory Guide 217, ‘Duty to Prevent Insolvent Trading: Guide for Directors’ (RG 217) issued in December 2024, provides directors with updated guidance on their duty to prevent insolvent trading, the liability of holding companies for debts incurred when a subsidiary is insolvent, and the use of safe harbour to obtain protection from liability for insolvent trading. The guide was last updated in 2020 and is the product of ASIC’s consultation with registered liquidators, professional bodies, and other interested parties.
• The release of the updated guide signals ASIC’s commitment to supporting the government to ensure directors clearly understand their obligations and are held more accountable for their actions.

Australian government taxation and superannuation reforms

• Taxpayers can no longer claim an income deduction for ATO interest charges incurred on or after 1 July 2025. This applies to general interest charges and shortfall interest charges for late payments and underpayments. It is expected to have a significant impact on businesses that are already experiencing cash flow difficulties.
• Further reform is planned with the proposed introduction of the ‘Payday Superannuation’ policy from 1 July 2026. If legislated, this policy will require employers to pay their employees’ superannuation at the same time as their salary and wages. The legislation is currently in draft form, with consultation concluding on 11 April 2025. If implemented, it will place substantial financial pressure on employers. Under the current system, superannuation is paid at least every three months; shifting to a payday-based model will require businesses to manage cash flow more tightly and consistently.

In a recent article published by ABC News, it reported on the Super Member’s Council statistics on unpaid superannuation:

A 2024 report by the council calculates that 2.8 million people are failing to receive their full super entitlements each financial year, with the average underpayment per affected worker being $1,810.

These statistics give some insight into the significance of the impact this policy will have on businesses.

Is there a silver lining?

Perhaps it is not all doom and gloom. These measures are aimed at businesses that use the system to avoid or delay paying their creditors, often at the expense of those that meet their obligations. The silver lining is that if the reforms are effective, they will help ensure that only businesses operating responsibly and fairly continue to survive. That must be a good thing. In the meantime, there is likely to be more pain to come for struggling businesses as they adjust to these tougher measures. The message to businesses is now clear: the time of pandemic-era leniency is over.