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According to non-bank lender ScotPac’s SME Growth Index Report, which surveyed 727 enterprises with annual revenues of $1 million to $20 million, 20 per cent of SMEs cited tax and compliance costs as their greatest hit to cash flow, followed closely by rising input and supply costs (19 per cent).
The report, which has tracked SME sentiment since 2014, also found that wage and payroll commitments were a major pressure, cited by 17 per cent of respondents, while access to credit was identified by 12.5 per cent.
Smaller businesses were more likely to identify access to credit as a challenge, with 15 per cent of SMEs in this category citing it as a major pressure, compared with 10 per cent of larger businesses.
ScotPac chief financial officer David Kirwan said the findings highlighted the importance of planning for upcoming financial obligations, particularly where payments fell due before customer invoices had been settled.
“Tax, supplier and payroll costs can all place pressure on working capital, particularly when payments are due before customer invoices have been settled,” he said.
Tax pressures and compliance obligations
A range of regulatory changes have added to the pressures facing SMEs this year, with the introduction of Payday Super and a tougher approach to tax debt enforcement among the most notable.
From 1 July, employers have been required to pay employees’ superannuation guarantee at the same time as wages, replacing the previous quarterly payment framework.
Ahead of the changes, non-bank lender Banjo Loans found that only 60 per cent of business survey respondents were confident their cash flow could comfortably absorb the more frequent superannuation contributions.
Brokers also told Broker Daily that the change could trigger a “structural shift” in how SMEs manage cash flow and access credit.
Nathan Murphy, director of BlueRock, told Broker Daily that businesses which had never previously used such products were looking into arranging working capital facilities, specifically overdrafts and lines of credit.
“For a lot of clients, this has been the trigger to put a proper facility in place that gives them comfort in advance of the changes,” he said.
“A line of credit/overdraft is generally the most suitable solution. They’re drawing only what they need, repaying as cash comes in, and the cost is relatively low when managed well.”
Another significant pressure has been the Australian Taxation Office’s increased enforcement of outstanding tax debts.
ATO data analysed by financial analysis company CreditorWatch found that business tax defaults began to spike in October 2023, with more than 30,000 defaults in effect by January 2026.
Broker Daily also spoke with Accendo Financial partner Trent Carter on a recent episode of Finance Specialist about the impact of the ATO’s approach to tax debt.
Meanwhile, another recent regulatory change affecting businesses was the introduction of the card surcharge ban.
According to non-bank lender OnDeck, 44 per cent of businesses plan to increase prices to offset the additional costs, while 66 per cent expect the ban to increase their expenses.
The changes have prompted one broker to start a national campaign against the government’s policy.
External risks threaten growth
Alongside rising operating costs, SMEs are also contending with a range of external factors that could undermine business growth.
Government economic policy and uncertainty, alongside the prospect of a domestic or international recession, were identified as the leading external risks, both cited by 18 per cent of businesses.
Inflation-driven energy costs were another concern, identified by 13 per cent of respondents, while 12 per cent pointed to supply chain disruption linked to geopolitical conflict.
The findings were broadly consistent across businesses of different sizes.
Businesses look to reshape supply chains
Businesses affected by disruption stemming from the conflict in the Middle East are also looking to reshape their supply chains over the next 12 to 18 months.
Almost half (47 per cent) said they planned to secure more flexible supply chain funding, while 31 per cent intended to move closer to suppliers and customers.
A further 23 per cent said they planned to shorten or simplify their supply chains.
Kirwan said businesses should work with their advisers to update forecasts and identify potential funding gaps as they respond to changing conditions.
“Whether responding to day-to-day cash flow pressures or wider external risks, business owners should work with their advisers to update forecasts, identify potential funding gaps early and secure appropriate support,” he said.
[Related: Payday Super begins to bite for SMEs]
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