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Brokers across the LMG network are reporting a surge in business funding inquiries linked to tax deductibility changes scheduled for July.
There has been a sharp rise in business finance inquiries related to tax debt across the aggregator LMG’s network, driven by upcoming changes to tax deductibility.
LMG brokers have reported a 486 per cent spike in commercial finance queries across its broker network related to tax debt in the financial year 2025 compared to the same period in FY24, as business owners look for funding options to help them prepare for looming changes.
The trend comes ahead of upcoming changes to the tax deductibility of Australian Taxation Office (ATO) interest charges.
First announced in 2023, the Albanese government said it would amend the tax law to deny income tax deductions for ATO interest charges incurred in income years starting on or after 1 July 2025.
From next month, income tax deductions for general interest charges (GIC) and shortfall interest charges (SIC) will no longer be allowed, which could significantly increase the cost of carrying tax debt for small businesses.
With the current GIC rate sitting at 11.17 per cent and compounding daily, many small and medium-sized enterprises (SMEs) are moving quickly to restructure or refinance their obligations before the cut-off date, LMG explained.
Andrew Vitucci, finance broker at My Lending Specialist, said the upcoming change has triggered a shift in client urgency.
“ATO debt has always been a challenge for small business owners, but the ability to claim interest as a deduction softened the blow and that safety net is now gone. We’ve seen a significant increase in funding inquiries directly tied to ATO debt over the past eight weeks,” Vitucci said.
“Clients are now treating this as a priority. They’re wanting to consolidate or refinance before this becomes a much more expensive liability.”
Elisha Zejfert, managing director at finance brokerage Savvi Lending, echoed the sentiment, saying the change has sparked increased awareness among business owners who may have previously delayed action.
“There’s definitely a sense of urgency in the market right now,” Zejfert said.
“Business owners are realising that doing nothing is no longer an option, particularly those already under cash flow pressure. I expect inquiries will continue into the new financial year as more SMEs become aware of the long-term cost implications of holding onto tax debt.”
What can brokers do?
Given that the majority of the $52 billion in outstanding ATO debt is owed by SMEs, brokers have long been urged by lenders (including non-banks Pepper Money and Banjo Loans) to work with SMEs and their accountants to “get on the front foot” of these changes.
For example, tax advisers have flagged that while ATO interest charges will no longer be tax-deductible from 1 July, interest paid on business loans will generally continue to be so, dependent on circumstances (SMEs are urged to seek professional tax advice from a qualified tax adviser).
Tim Wells, head of operations asset finance at LMG, said the surge in broker inquiries highlights the important role they play in supporting small businesses.
“The proactive engagement we’ve seen over the past couple of months reflects just how vital finance brokers are in helping clients understand and manage the cost implications of these types of regulatory changes,” he said.
“This is a strong example of the industry working together – brokers, lenders and aggregators – to ensure small businesses have access to timely advice and tailored finance solutions.”
Susan Franks, a tax expert at Chartered Accountants Australia and New Zealand (CA ANZ), said small businesses needed to review their tax and cash flow strategies ahead of changes.
“Small businesses currently hold the majority of the ATO’s outstanding tax debt, and this change will make that debt even more expensive,” Franks said.
“Previously, small businesses may not have been concerned about accumulating interest on tax debt, as it was deductible at tax time.
“But from 1 July 2025, small businesses could find themselves in a difficult situation and if not managed carefully, interest owed to the ATO could quickly exceed the amount of tax they were originally meant to pay.”
You can find out more about how brokers can support SMEs at the end of the financial year in the May edition of The Adviser magazine here.
[Related: Finance brokers urged to help SMEs navigate deduction changes]
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