Are your business expenses exceeding the revenue you generate? If so, you’re likely running at a loss. Many businesses face this challenge during their early stages due to startup costs. Similarly, businesses in a growth phase often encounter losses as they invest in significant operating expenses, such as machinery, new premises, or additional staff. While these investments can be necessary for expansion, running at a loss for an extended period without proper planning can harm both your business and your mental health. Understanding ATO Debt Management is crucial for navigating these challenges effectively and ensuring long-term financial stability.

Even if your business is operating at a loss or does not meet the tax threshold, you still must lodge your tax return. The type of return you need depends on your business structure:

• Sole Trader: Individual Tax Return
• Partnership: Each partner reports their share of the partnership income in their personal tax return, alongside a partnership return.
• Company: Company Tax Return and directors must also lodge individual tax returns.
• Trust: Trust Income Tax Return.
• Not-for-Profit Organisations: May qualify for tax concessions (click here for more details).

For more information on business structures and concessions, click here.

There are also different tax exemptions depending on your industry. Check out the ATO website for more info. For example, primary producers (such as farmers) who meet specific criteria can claim their production losses against other income. Generally, if your business losses exceed your taxable and exempt income from other sources, you can claim a tax loss.

A tax loss can be advantageous. It’s possible to deduct tax losses against investment gains, such as capital gains, within the same tax year. If your losses exceed gains, creating a net loss, it can offset your ordinary income. Additionally, tax losses can be carried forward to offset future income, making ATO Debt Management a critical strategy for optimising your financial position.

Understanding how to use tax losses to manage ATO debt effectively is essential but requires precise handling to ensure compliance.

If your business is trading at a loss or has incurred tax losses in the past, these can often be leveraged for future tax returns. However, managing taxation, compliance, and maximising benefits can be complex, which is why engaging a tax professional is critical. Give us a call—we’d love to chat about how we can help you and your business

The ATO has ramped up its efforts to recover unpaid taxes. After years of leniency due to COVID-19, they are now actively collecting debts—often with added interest. This has been a significant factor in the rise of Australian small businesses filing for insolvency. According to ASIC, insolvencies increased by 43% in the first quarter of the 2024–2025 financial year compared to the same period the previous year.

Here are some top tips when combatting ATO Debt:

Tip 1: Address the issue early.

Don’t avoid it—work with your accountant to negotiate a payment plan with the ATO that fits your budget. Once on a payment plan, you need to ensure that you meet all future obligations on time and in full. Avoid letting the debt grow into an unmanageable amount.

Tip 2: Set up a separate bank account for debt elimination.

This ensures that the funds are exclusively used for paying down debt and removes the temptation to dip into them for other expenses.

Tip 3: Break it down into manageable steps.

While working with your accountant on a formal payment plan, start making small, regular payments—even $100 a week. This demonstrates good faith when negotiating with the ATO and gradually reduces your debt.

HOT TIP: We have found for most of our clients, setting up a payment plan on a monthly basis is best for lumpy cash flow. You can pay this via a manual BPAY. Although the formal arrangement is monthly, we try to pay it weekly. If one week is tight due to low cash flow, you can make up for it with a double payment the following week or at end of the month. This approach eases financial pressure while ensuring obligations are met without large, overwhelming monthly hits.

A robust money management strategy is key to addressing debt, maximising profits, and fostering long-term business health. As a Mastery-level certified Profit First Professional, we can help you implement cash flow strategies tailored to your business, including effective ATO Debt Management solutions. Together, we can position your business for sound financial decisions and sustainable success. Contact us to learn more.