Calls rise for government to fix SME ‘cash flow crunch’

More than half (52 per cent) said government support for small businesses will determine who they vote for.

Topping the list of SME concerns is the cost of living and inflation (cited by 84 per cent of small business owners), with 61 per cent saying they would like rising costs to be addressed in the upcoming federal election.

Three in five (60 per cent) small business owners said they would like to see a reduction in tax rates. Currently, small businesses with a turnover under $50 million are taxed at 25 per cent, and many business owners believe a reduction to 20 per cent would provide the financial flexibility to help them reinvest in their operations and grow.

Moreover, one-third of small business owners would like to see an expansion of the instant asset write off (IAWO), which allows businesses to immediately deduct the cost of assets under $20,000 rather than depreciating them over time.

Cameron Poolman, CEO of SME lender OnDeck Australia, commented: “Australia’s 2.5 million small businesses form a significant voting bloc. The concerns of our most entrepreneurial Australians cannot be ignored by either side of politics...

"We understand that tax cuts could have an inflationary impact that may just push interest rates higher. But we agree with one in three small business owners who would like to see an expansion of the Instant Asset Write-off," he said.

“This investment is critical to building a stronger small business sector. The Labor government has pledged to extend the IAWO for another 12 months, to 30 June 2026, if it wins the election. However, this commitment falls short of the Coalition's pledge to offer a permanent $30,000 instant write-off.”

Similarly, the CEO of SME lender Banjo Loans, Guy Callaghan, has said that he wants to see the reinstatement of the IAWO.

“When the Asset-Write off was removed in the Budget, it was extremely disappointing. We had hoped to see more access to this, not removal of it," he said, adding that more government support was also needed to help SMEs transition to digital payment systems.

Callaghan has also called on politicians to push for incentives that make Open Banking more accessible and beneficial for SMEs, expand financial relief through grants and low-interest loans, and invest in innovation and workforce development to ensure their competitiveness and long-term sustainability.

“This election presents a crucial opportunity for politicians to show their commitment to small businesses,” Callaghan said.

“SMEs need action now to ensure they can thrive in the digital economy. It’s time for our leaders to deliver the support that businesses need to succeed."

Superannuation changes

But it’s not just taxes that are putting strain on businesses. Starting on 1 July 2025, the superannuation guarantee rate will increase from 11.5 per cent to 12 per cent, adding to payroll costs. At the same time, businesses will no longer be able to claim tax deductions for the General Interest Charge (GIC) and Shortfall Interest Charge (SIC).

The removal of these deductions could make tax liabilities even more costly for SMEs, increasing financial strain for businesses that are already struggling to manage their cash flow, according to SME lenders Earlypay and ScotPac.

“Late payments will attract the Superannuation Guarantee Charge (SGC), which is not tax-deductible, adding further financial pressure,” Earlypay said. “While this benefits employees’ retirement savings, it increases payroll expenses for employers.”

“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,” the lender said.

James Beeson, CEO of Earlypay, highlighted that these combined challenges are leading to a “cash flow crunch” for SMEs.

“At a time when SMEs are already battling rising operational costs, a tight labour market, and inflation, these changes will only increase cash flow pressures,” Beeson said. “Many businesses will need to rethink their finance strategies," he said.

While the introduction of payday super will not commence until 1 July 2026, Beeson suggested this would also place further strain on businesses in 2026. As such, he said SMEs should review budget and payroll structures to account for increased SG rates and tax law changes and may also need to consider invoice finance to maintain steady cash flow and meet payroll and superannuation obligations. He added SMEs may need to ensure payroll systems can handle more frequent super payments ahead of the introduction of payday super.

Similarly, ScotPac chief executive Jon Sutton said the loss of tax deductibility from 1 July would make ATO payment plans a very expensive option for Australian businesses.

“Business owners with an ATO payment plan – or those considering applying for one – must understand the impact of these new rules and the options available to them,” Sutton said.

He added that businesses may need to explore financing alternatives like business loans that act as a line of credit, invoice finance or asset and equipment refinancing.

The interest payable on these types of loans would remain tax-deductible after 1 July, Sutton said.

“I urge any business owner with an ATO payment plan or a looming tax debt to talk with their key advisors about available options ahead of these new rules coming into effect on 1 July.”

First election debate a let down for SMEs: COSBOA

With voters heading to the polls in just a few weeks, OnDeck said both sides of politics would do well to consider the needs of the small business community.

The OnDeck CEO concluded: “Any government [that] overlooks the small business community at election time does so at their own peril."

On Tuesday evening (8 April), the leaders of the two main political parties (Prime Minister Anthony Albanese and Opposition Leader Peter Dutton) held the first of two televised election debates to discuss their policies and plans for the country.

Reacting to the first debate, Luke Achterstraat, CEO of the Council of Small Business Organisations Australia (COSBOA) lamented that no “compelling policy solutions” were presented to give small businesses “the fair go they deserve”.

He said: “For the millions of Australians who put their blood, sweat and tears into running a small business, this provides little certainty. These mum-and-dad businesses are the collateral in a war of words. The real issues facing small businesses – those impacting whether or not they can keep their doors open – are being swept to the side.

“Right now, Australian small business needs political leaders that show courage and are willing to make impactful policy decisions that make a tangible difference. They need political leaders to step up and provide immediate relief to small businesses by cutting the company tax rate for small businesses from 25 per cent to 20 per cent,” he said.

[Related: CAFBA calls for instant asset write-off to be made permanent]