April 2025 Round Up
This month, we focus on important updates that impact businesses and SMSFs, from changes in tax deductibility to new superannuation requirements and climate-related reporting obligations. With ATO interest no longer tax-deductible starting 1 July 2025, businesses will need to adjust their financial strategies. Meanwhile, the government has released draft legislation for payday super, set to begin in 2026, which will align super contributions with regular pay cycles. Additionally, small businesses must be aware of the potential indirect effects of mandatory climate disclosures, as large businesses may request emissions-related data to meet new scope 3 reporting requirements. Stay informed and prepared for these upcoming changes that will affect your operations and compliance.
1. ATO Interest is no longer tax deductible: What you need to know Read the full article
2. Government unveils draft legislation for payday super Read the full article
3. Indirect Climate Reporting: Why it matters for small business Read the full article
ATO Interest is no longer tax deductible
What’s Changing?
From 1 July 2025, the General Interest Charge (GIC) and the Shortfall Interest Charge (SIC) will no longer be tax deductible, as outlined in a recent bill passed by Parliament.
GIC: Applies when a tax liability is paid after the due date, including under payment arrangements.
SIC: Applies when a tax return is amended, resulting in additional tax payable.
What This Means for You:
Any GIC or SIC incurred before 1 July 2025 will remain deductible.
The new law only affects GIC or SIC from 1 July 2025 onwards, including existing payment arrangements.
This change means businesses will no longer be able to claim a tax deduction on these charges, potentially increasing the overall cost of unpaid tax liabilities.
Current Impact: Rising Costs
The current GIC rate is 11.17%. Without the ability to deduct this interest, the cost of paying late will increase significantly for businesses.
What You Can Do About It:
Explore Alternative Financing Options: Businesses can still claim deductions on interest for loans taken to cover tax debts. Now may be a good time to consider alternative financing at lower rates, which could be tax deductible.
Plan Ahead: With this change, it’s important to review your tax obligations and ensure timely payments to avoid higher costs.
By staying informed and considering different financing options, small business owners can reduce the impact of these changes.
Government unveils draft legislation for payday super
Overview of the Reforms:
The Australian Government, through Assistant Treasurer and Minister for Financial Services Stephen Jones, has released draft legislation aimed at addressing the billions of dollars in unpaid superannuation each year. The reforms, which will take effect from 1 July 2026, will require employers to pay employees’ superannuation at the same time as their salary and wages.
Key Changes in the Legislation:
Introduction of ‘Qualifying Earnings’: The proposed legislation introduces a new term, qualifying earnings. This refers to the earnings on which individual Superannuation Guarantee (SG) contributions are calculated.
Qualifying earnings will include:
Ordinary Time Earnings (OTE) as defined under the current SG framework.
Sacrificed OTE in exchange for additional superannuation contributions through salary sacrifice arrangements.
Payments considered part of ‘salary or wages’ under the existing law for superannuation purposes.
New ‘QE Day’: The day that qualifying earnings are paid to an employee will be known as a QE day under the new rules.
Super Contributions and Payment Deadlines:
Employers will be required to ensure super contributions are received by the superannuation fund within seven days from the day the employee is paid their qualifying earnings.
SG Charge Calculation: The amendments also recalibrate the SG charge, making it more precise to ensure employees are compensated for lost earnings due to delayed contributions. This change will also include a late payment penalty if the SG charge remains unpaid after the specified period.
What This Means for Employers:
Simplified Payroll: Employers will now pay super at the same time as salary and wages, simplifying the process and ensuring better compliance with superannuation obligations.
Increased Penalties: Employers who fail to pay the SG charge on time will face more significant consequences, including penalties for late or missed payments, encouraging prompt action on late contributions.
Benefits for Employees:
Real-Time Super Growth: The new system will allow more than three million workers to see their superannuation grow in real-time, alongside their wages, reducing the chances of lost super.
Improved Retirement Outcomes: Employees will benefit from compounding investment returns due to more frequent super contributions. A 25-year-old median income earner could be $6,000 better off at retirement, or 1.5% better off, compared to the current quarterly payment system.
Consultation and Timeline:
The government is inviting public submissions on the draft legislation, with consultation closing on 11 April 2025.
The reforms are scheduled to take effect on 1 July 2026.
Industry Reaction:
ASFA’s Support: Mary Delahunty, CEO of the Australian Superannuation Funds Association (ASFA), welcomed the draft legislation, stating that payday super would help employees build their superannuation in real-time, reducing lost super and improving retirement outcomes.
“Payday super means over three million workers will see their super build in real-time, alongside their wages,” said Delahunty.
“It will mean less lost super and better outcomes in preparation for retirement.”Commitment to Successful Implementation: ASFA emphasized its commitment to ensuring payday super is implemented smoothly and delivers long-term benefits for Australian workers’ retirement savings.
Next Steps for Implementation:
ASFA has pledged to engage in the Treasury consultation process and work through the details to ensure the reforms are implemented successfully by 1 July 2026.
What Business Owners Need to Do Now:
1. Prepare for Payment Changes
From 1 July 2026, super will need to be paid at the same time as wages. Update your payroll system to track qualifying earnings and ensure timely super payments.
2. Review Payroll Systems
Ensure your payroll can calculate qualifying earnings and handle the new super payment requirements. Work with your accountant or bookkeeper to make necessary updates.
3. Plan to avoid Penalties
There will be stricter penalties for late super payments. Review your current practices to ensure super is paid on time and avoid these penalties.
4. Manage Cash Flow
Super will be paid alongside wages, so adjust your cash flow planning accordingly to avoid any disruptions.
5. Stay Informed
Keep up with the draft legislation and consider submitting feedback before 11 April 2025. Be prepared for any further updates as the legislation moves forward.
6. Communicate with Employees
Inform your staff about the upcoming changes so they’re aware of how super payments will be made more frequently.
Indirect Climate Reporting Requirements: Why it’s important for small business
Small businesses may soon be impacted by climate reporting requirements, even if they aren’t directly subject to them. The Australian Securities and Investments Commission (ASIC) has reminded businesses that large companies they work with may request emissions-related information to meet their reporting obligations. Here’s what small business owners need to know to prepare:
Why Small Businesses Should Care:
While small businesses won’t be directly affected by mandatory climate disclosures, they may still be asked for climate-related information by larger businesses in their supply chains. Large companies will need to report on scope 3 emissions, which include emissions from small suppliers, both up- and down-stream in the supply chain.
What You Might Be Asked For:
For example, a large business may need to report on their energy use. To fulfill that obligation, they might ask you for records such as electricity bills to get a full picture of their emissions. If you’re asked for emissions-related information, make sure to clarify exactly what is needed.
How to Handle Requests for Information:
In some cases, large businesses can use estimates or industry averages for calculating scope 3 emissions. If you’re unable to provide exact figures, you may be able to offer estimates instead. If you’re unsure, accountants and tax advisors can assist with providing the correct data.
Benefits for Small Businesses:
The shift towards climate reporting can offer small businesses valuable insights into potential risks and opportunities. With improved transparency, businesses will be better prepared for climate-related challenges, such as changes in insurance arrangements or disruptions in supply chains. It can also help uncover new business opportunities, particularly as large companies invest in climate resilience and adaptation.
Long-Term Reporting Requirements:
Starting in 2028, businesses with $50M+ in revenue, $25M+ in assets, or 100+ employees will have direct climate reporting obligations. ASIC encourages these businesses to familiarize themselves with the regulatory guidelines now, to be prepared for the upcoming changes.
Important: This is not advice. Clients should not act solely on the basis of the material contained in this article. Items herein are general comments only and do not constitute or convey advice per se. Also changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas. This article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our prior approval. Liability limited by a scheme approved under Professional Standards Legislation.
