ATO debt continues to drive record level of calls to small business financial helpline

Small business owners are facing increasing financial strain, with calls to debt helplines reaching unprecedented levels. The Small Business Debt Helpline saw a 21 percent increase in calls for the 12 months ending December 31, 2025, indicating a growing crisis among entrepreneurs and small business operators.

Rising Debt and ATO Action

The helpline provided assistance in 6,205 cases, with the majority relating to difficulties paying alleged tax debts. This surge in demand coincides with a record high in collectable debt held by the Australian Taxation Office (ATO), exceeding $50 billion. The ATO has stated that reducing this unpaid tax is a key priority.

Did You Know? The Small Business Debt Helpline has assisted 18,533 cases since it began in 2020, supporting 16,254 businesses.

The ATO is taking increasingly firm action to recover debts. A spokesperson warned that businesses ignoring payment reminders can expect escalated action. This includes more frequent use of Director Penalty Notices, which hold company directors personally liable for tax debts, and the reintroduction of garnishee notices, allowing the ATO to directly seize funds from bank accounts. The ATO is also reporting business debts to credit agencies, potentially hindering access to future credit.

Distress and Calls for Flexibility

Financial counsellors are reporting a significant increase in distress among callers. Anna Dooland, a counsellor with the Small Business Debt Helpline, noted that business owners are experiencing exhaustion and heightened stress levels. Many are worried about their personal finances, their employees, and the future of their businesses.

Expert Insight: The escalating number of calls to the Small Business Debt Helpline underscores the precarious financial position of many small businesses. The combination of rising costs, existing debt, and unforeseen economic shocks is creating a perfect storm of financial hardship for entrepreneurs.

In 2025, 64 percent of cases handled by the helpline involved debts to the ATO, up from 61 percent the previous year. The helpline assisted with $429 million in ATO debts, with a median debt size of approximately $70,000. The ATO encourages businesses facing difficulties to engage with them or their tax professional as early as possible.

Concerns Over ATO Approach

Australia’s tax ombudsman, Ruth Owen, has previously expressed concerns about the ATO’s increasingly stringent debt collection practices. Complaints continue to be received regarding the ATO’s perceived inflexibility in considering hardship or personal circumstances. Ms. Owen noted that some businesses are willing to repay their debts but require more flexible payment arrangements.

The tax ombudsman is currently reviewing the ATO’s use of general interest charges (GIC), which can significantly increase the total amount owed. These charges, currently at 10.5 percent, can quickly double a debt over time, making repayment impossible for some businesses. The ATO is also reviewing its taxpayer relief provisions and has introduced interim improvements to ensure consistency and streamline the remission process.

Beyond Tax Debt

While ATO debt is a major concern, small businesses are also struggling with other financial obligations. The Small Business Debt Helpline is also assisting with business loans, home mortgages tied to businesses, motor vehicle finance, and debts to suppliers. A growing trend involves smaller lenders placing caveats on directors’ homes and allowing them to borrow against their personal residences, putting family assets at risk.

Frequently Asked Questions

What types of businesses are most frequently seeking help?

The Small Business Debt Helpline receives the most calls from businesses in the construction, accommodation and food services, and personal and other services industries.

What is the ATO doing to address the rising debt levels?

The ATO is prioritizing the reduction of unpaid tax debt and is taking firmer action to recover funds, including issuing Director Penalty Notices, using garnishee notices, and reporting debts to credit agencies.

What is the role of the tax ombudsman?

The tax ombudsman is reviewing the ATO’s debt collection practices and has raised concerns about the lack of flexibility in considering individual circumstances and the impact of general interest charges.

As the ATO continues to pursue outstanding debts, and economic pressures persist, what strategies can small business owners proactively employ to safeguard their financial stability?