The end of financial year is supposed to feel like a checkpoint. A moment to review, reset and get ready for what comes next.
For a lot of Australian business owners, though, EOFY feels more like a pressure cooker. BAS (Business Activity Statement) obligations are due. Super is due. Tax bills are arriving. And somewhere in the mix, there is probably an ATO debt that has been quietly sitting on the books, manageable enough to defer but large enough to worry about.
If that sounds familiar, you are not alone. ATO debt among small and medium businesses has increased significantly in recent years and heading into EOFY, many owners are now realising the debt they hoped to outgrow is slowing them down.
This guide breaks down why EOFY hits harder when you are carrying tax debt, what your real options are and how to position your business for a cleaner start in FY2027.
Why EOFY Creates Cash Flow Pressure for SMEs?
June can be a stressful month for many Australian businesses.
There is a lot happening at once. Super contributions are due, BAS payments need to be finalised, payroll tax may increase and business owners start getting a clearer picture of their end-of-year tax position.
For SMEs already managing tight cash flow, this can feel like everything is landing at the same time. And if there is existing ATO debt in the background, even on a payment plan, the pressure can build quickly.
But this does not always mean the business is not doing well.
Many profitable and growing businesses still run into cash flow pressure around EOFY. Client payments may be delayed, invoices may not line up with due dates and several expenses can hit within a short period.
That is why EOFY pressure is often less about profitability and more about timing.
What Most Business Owners Miss About ATO Debt and Lending?
Industries like construction, trades, hospitality, retail and professional services often deal with lumpy cash flow. Some months are strong. Others are slower. But tax obligations still arrive on fixed dates.
That is where the pressure starts.
A business may have had a good quarter, but if client payments are delayed or invoices are still outstanding, the BAS payment can suddenly become difficult to cover.
The biggest cash flow concern among many business owners right now is this simple mismatch: irregular inflows and fixed outflows. Wages, tax, rent and supplier payments still need to be paid on time, even when income does not arrive as expected.
Over time, this can turn into ATO debt. Not because the business is failing, but because the money coming in and the money going out are not lining up.
One common misconception about ATO debt is that it means a business is in serious trouble.
That is not always the case.
Many businesses with ATO debt are still trading well and making a profit. Sometimes the debt builds up during a growth phase. Sometimes it happens after a difficult period. And sometimes, tax payments are pushed back because the business is dealing with more immediate pressures, like hiring staff, buying equipment or managing a major contract.
The ATO often becomes the creditor that gets delayed because they are not going to stop supplying stock or cancel a job overnight.
But that does not make the debt harmless.
What many business owners miss is that ATO debt can signal cash flow stress to lenders. Even if the business is profitable, unpaid tax debt can raise questions about how the business is managing its obligations.
If it is ignored for too long, it can severely limit funding options later.
ATO debt is not always a sign of poor performance, but it is something lenders take seriously. The earlier it is addressed, the more options a business may have.
Why ATO Debt Funding Requests May Increase This Year
More SMEs may look for external finance to manage ATO debt as EOFY 2026 approaches.
There are a few reasons for this.
Business costs have increased, margins are tighter and many SMEs are still dealing with obligations that were delayed during or after the COVID period.
At the same time, the ATO has become more active in recovering overdue debt. It is no longer something business owners can quietly push aside and hope will sort itself out later.
Formal recovery actions, such as director penalty notices, garnishee orders and payment demands, are becoming harder to ignore.
That is why more business owners are expected to look at refinance or debt consolidation options this year.
For many, EOFY becomes the point where the pressure is too clear to delay any further.
The Hidden Cost of Carrying ATO Debt
Most business owners know there is a General Interest Charge (GIC) accruing on unpaid ATO debt. As of mid-2025, the GIC rate sat at around 11% per annum which is not cheap.
But the cost of ATO debt goes beyond interest. It also affects your ability to borrow. Many lenders will decline or reduce a loan application if there is an active ATO debt that does not have a formal payment arrangement in place. Even lenders who will consider the application will price the risk differently.
There is also a credit reporting dimension. The ATO has been reporting business tax debts to credit bureaus since 2020 for debts over $100,000 that are not subject to a payment plan. This can affect your credit profile without you realising it.
And then there is the operational impact. When a significant chunk of your available cash is mentally allocated to an ATO debt, it constrains your ability to invest in growth, take on larger contracts, or manage the normal peaks and troughs of the business cycle.
Practical Ways to Improve Cash Flow Before EOFY
If you are heading into June with ATO debt and cash flow pressure, there are a few practical steps worth considering before 30 June.
Review your BAS position now, not in July. If you know a liability is coming, you have more time to plan around it. Surprises are usually where the pressure builds.
Check whether your ATO payment plan is still appropriate. . If your cash flow has changed since the plan was first set up, the repayments may no longer be realistic. It is better to review this early than wait until payments are missed.
Look at your receivables. Outstanding invoices are often the most overlooked source of working capital. Following up debtors before June can make a real difference to your cash position.
Consider whether external finance makes sense. For some businesses, external finance may also be worth considering. This could mean consolidating ATO debt into a business loan or using a working capital facility to clear overdue tax, ease short-term pressure and improve how the business presents to lenders.
The key is to act early. The more time you have before EOFY, the more options are usually available.
ATO Payment Plan vs Business Finance: Which One Actually Helps?
Many business owners assume that setting up an ATO payment plan solves the problem. In some cases, it does. But it is important to understand what an ATO payment plan achieves and what it does not.
An ATO payment plan can help you avoid immediate recovery action and keep your account in good standing while you repay the debt over time.
However, it does not improve your cash flow or remove the liability from your balance sheet. The debt is still there, General Interest Charges (GIC) continue to accrue and lenders will usually see the outstanding ATO liability when assessing a finance application.
Business finance works differently.
By refinancing or consolidating the ATO debt into a business loan, the tax debt can be cleared in full. This may stop ongoing ATO interest charges, remove the liability from your ATO account and, in some cases, strengthen your borrowing position for future funding needs.
Of course, that also means repaying a lender instead of the ATO. But for many businesses, fixed repayments and structured loan terms provide greater certainty and better cash flow management.
There is no one-size-fits-all solution. The right approach depends on the size of the debt, the stability of your cash flow and your plans for the business over the next few years.
That is why it is worth reviewing your options before EOFY, while you still have time to choose the solution that best supports your business.
How Lenders Assess Businesses with Existing ATO Debt?
This is where many business owners get caught out.
They often assume that having ATO debt automatically means they cannot get finance. That is not always true. But lenders will look closely at how the debt started, how it is being managed and whether the business has a clear plan to deal with it.
Traditional banks are usually more conservative. If there is unresolved ATO debt, they may decline the application or significantly reduce the amount they are willing to lend. To them, unpaid tax debt can signal cash flow stress, even if the business is still trading well.
Non-bank and specialist lenders may take a broader view.
They often look at the full business picture, including trading history, revenue consistency, the reason for the ATO debt and whether there is a practical plan to clear it.
For businesses that are fundamentally strong but carrying an ATO liability, this type of assessment can create options that may not be available through a bank.
The key is to present the situation clearly and honestly. A strong application should explain why the debt exists, how the business is performing now and how the funding will help improve the position going forward.
Planning Ahead for FY2027
Once EOFY is behind you, it is worth thinking about how to avoid being in the same position next year.
A few things that make a meaningful difference for SMEs managing ATO obligations:
- Set aside BAS (Business Activity Statement) and tax obligations as revenue arrives, not as a lump sum at quarter end.
- Review your cash flow forecast regularly, not just once a year. A quarterly check-in can help you spot pressure early and plan before it becomes urgent.
- Keep your ATO account up to date as well. If there are errors, missed payments or unexpected balances, it is better to deal with them early before they grow into a bigger issue.
- It also helps to build a relationship with a broker who understands business finance. That way, if you do need funding quickly, you already have someone who understands your business and can guide you through the available options.
The businesses that handle EOFY pressure well are usually the ones that plan around their tax obligations throughout the year, instead of treating them as something to deal with at the last minute.
Thinking Through Your Options Before 30 June?
If you are carrying ATO debt and heading into EOFY feeling uncertain about your options, it is worth having a straightforward conversation before the pressure peaks.
At Xpress Finance, we work with Australian business owners who are dealing with this exact kind of pressure.
We can help you understand whether business finance makes sense for your situation, how lenders may view your application and what steps you can take before 30 June.
There is no pressure and no obligation. Just a straightforward conversation about where your business stands and what options may be available.