Tax Debt Consolidation and Business Reinvestment

As I reflect on the end of the financial year, my mind turns to how important it is for our partners to be kept informed of critical financial strategies that could help give their self-employed clients a huge leg up in the next financial year. From tax debt consolidation to reinvesting, there are some terrific strategies that could help turbo-boost growth in the 2024/25 financial year.

Tax Debt and Insolvencies are on the Rise

Tax debt can be a significant burden for Australia’s 2 million self-employed individuals. Australian Taxation Office (ATO) repayment plans often come with high-interest rates and rigid schedules. Refinancing a home loan to consolidate tax debt offers a more flexible and financially savvy alternative.

Following a pause during COVID, the ATO has increased its focus on small business debt. As of January 1, 2024, small businesses owed the ATO $34 billion, representing 65% of total collectable debt. The ATO is now laser-focused on enforcement action to collect this debt.

The impact of COVID on small businesses is evident in ASIC’s corporate insolvency statistics for 2022-2023. During this period, SME and self-employed insolvencies dominated external administrator reports. 83% had assets of $100,000 or less, 82% had fewer than 20 employees, 32% had liabilities of less than $250,000, and 68% had liabilities of less than $1 million. The construction industry saw the highest % of insolvencies at 28%, followed by accommodation and food services at 15%.

By refinancing with Rate Money, the self-employed can pay off ATO debt while simplifying financial management by consolidating multiple debts into a single manageable payment.

Reinvesting to Fuel Growth

Beyond managing tax debt, refinancing with Rate Money can unlock capital for business reinvestment. The 2024 Banjo SME Compass Report reveals that 59% of SMEs plan to invest in new technology, 46% plan to increase headcount, and 53% aim to invest in significant new assets or equipment.

In the current economic climate, where costs have surged, having access to additional funds can make a substantial difference:

• Modernising and upgrading equipment can improve efficiency and productivity. This investment can lead to long-term cost savings and a competitive edge in the market. The 2024 Federal Budget extended measures to free up cash flow and reduce compliance costs through the instant asset write-off, which will remain at $20,000 until 30 June 2025.
• Opening new locations or expanding existing ones can help a business reach new markets and/or increase revenue streams.
• Investing in marketing can enhance brand visibility and attract new customers. Additionally, hiring skilled personnel can drive innovation and improve service delivery.
• With the extra capital, businesses can explore new ventures, whether it’s launching new products or entering untapped markets.
• Staying updated with the latest technology is crucial for maintaining competitiveness. It can streamline operations, improve customer experience, and provide valuable data insights.

Is Refinancing a Smart Option?

Refinancing offers several advantages for the self-employed, including competitive interest rates, lower fees, and flexible loan options. Alternative documentation (Alt Doc) loans simplify the process with single income verification, reducing paperwork. Additionally, many providers waive application fees and eliminate risk fees, making refinancing more affordable and providing better value.

Also, some refinancing options allow for unlimited cash-out, which provides the freedom to access funds when and how they want, which can be highly valued by the self-employed and SMEs.

Driving Growth and Achieving Goals

The end of the financial year is an opportune time for self-employed individuals to reassess their financial strategies. Thanks to competitive rates and tailored options for self-employed clients, refinancing with Rate Money can provide a powerful solution for managing tax debt and unlocking funds for business reinvestment.

I encourage you to explore how our flexible and competitive loan options can benefit your self-employed clients.