Small Business Superannuation Clearing House is shutting down – Here’s what small businesses need to know

 

What’s changing and when? 

• The ATO’s Small Business Superannuation Clearing House (SBSCH) will be closed to new users starting 1 October 2025. 

• It will fully close and stop servicing existing users on 1 July 2026. 

This is part of the wider Payday Super reform, aiming to align super payments with employee paydays 

 

Who’s affected? 

The SBSCH currently helps small employers: those with fewer than 20 employees or under $10 million turnover pay all their staff’s super in one go. It’s a free, government run service. 

 

Why it matters 

All employee’s super is required to be paid following SuperStream standards. The SBSCH has been a simple, cost-free convenience for many small businesses to meet SuperStream standards. Its closure means an increase in potential costs as you will now be forced to find for an alternative SuperStream compliant clearing houses or payroll software that may charge you fees.  

 

What you should be doing now 

Start planning early. Here’s how: 

1. Audit your current setup: do you use the SBSCH? 

1. Explore alternatives: Look at alternatives clearing houses, super fund portals or payroll software that have their own clearing houses. 

1. Update your systems: If your payroll or accounting software handles super contributions, ensure it’s ready and tested your payroll. 

1. Train your team: Ensure any staff involved understand the new process to prevent mistakes or delays. 

1. Pay super more often: If cashflow permits try bringing the super payment forward to get used. 

 

Final things to note 

Xero now offers auto super on all their consumer subscription plans making it easy to be SuperStream compliant. Check with your default super fund if they offer a free or low-cost clearing house for you to use. 

 

What is a default super fund? 

Every employer must nominate a default superannuation fund. This is the fund that receives super contributions for any employee who has not chosen their own fund and does not have an existing “stapled” fund linked to them.  

Is your loan interest really deductible? 

We often get asked whether interest on a loan can be claimed as a tax deduction. 

The golden rule is simple: it depends on what the money was borrowed for. 

 

Why did you borrow the money? 

• Borrow to buy a private home → no deduction. 

• Borrow to buy shares, a rental property, or a business etc → interest is generally deductible. 

 

Redraw vs Offset Accounts 

This is where people often trip up: 

• Redraw facility: Treated as a new borrowing. Deductibility depends on what you spend the redrawn money on. 

• Offset account: Treated like your savings account. Taking money out is not borrowing, so deductibility doesn’t change. 

 

Case Study: Anne vs Austin 

• Anne’s redraw: Anne paid extra into her home loan, then redrew funds to buy shares. Because the redraw is a new loan for an investment, the interest on that portion is deductible. 

• Austin’s offset: Austin parked savings in his offset account, then withdrew the money to buy shares. Because the original loan was for his private home, none of the interest is deductible. 

Same outcome financially, very different tax outcome. 

 

Parking borrowed funds in an offset 

Some clients borrow money to invest “later” but park the funds in an offset in the meantime. This is risky: 

• While in the offset, the borrowed funds aren’t producing income. 

• Worse, it may “taint” the loan, making it hard to ever claim deductions, even if you eventually invest. 

 

Key takeaway 

Loan structuring is an area where little mistakes can cause tax problems. Always check with your accountant before setting up or moving money around loan facilities. We can work with you and the bank/broker to make sure your loans are structured correctly to maximise the interest deductibility.  

ATO interest charges are no longer deductible, so what are your options? 

As we explained in the July edition of our newsletter, general interest charge (GIC) and shortfall interest charge (SIC) imposed by the ATO are no longer tax-deductible from 1 July 2025. This applies regardless of whether the underlying tax debt relates to past or future income years. 

With GIC currently at 11.17%, this is now one of the most expensive forms of finance in the market and unlike in the past, you won’t get a deduction to offset the cost. For many taxpayers, this makes relying on an ATO payment plan a costly strategy. 

 

A couple of options may help alleviate some of the pressure: 

1. Organise an interest payment plan with the ATO (discussed in our September newsletter edition). 

1. Refinancing ATO Debt (discussed below). 

 

Refinancing ATO Debt 

Businesses can sometimes refinance tax debts with a bank or other lender. Unlike GIC and SIC amounts, interest on these loans may be deductible for tax purposes, provided the borrowing is connected to business activities. 

While tax debts will sometimes relate to income tax or CGT liabilities, remember that interest could also be deductible where the borrowed funds are used to pay other tax debts incurred in the course of running a business, such as: 

• GST 

• PAYG instalments 

• PAYG withholding for employees 

• FBT 

However, before taking any action to refinance ATO debt, it is essential to carefully consider whether the interest will in fact be deductible. 

 

Individuals 

For individuals with a tax debt, the treatment of interest on borrowings used to pay that debt depends on whether the debt arose from a business activity: 

• Sole traders: If you are genuinely carrying on a business, interest on borrowings used to pay tax debts from that business is generally deductible. 

• Employees or investors: If your tax debt relates to salary, wages, rental income, dividends, or other investment income, the interest is not deductible. Refinancing may still reduce the overall cost if the new loan’s interest rate is lower than the GIC, but it won’t generate a tax deduction. 

Example:
Sam is a sole trader who runs a café. He borrows $30,000 to pay his tax debt, which arose entirely from his café profits. The interest on the loan should be fully deductible. 

However, if Sam also earns salary from a part-time job and some of his tax debt relates to that employment income, only a portion of the interest on the loan will be deductible. 

If $20,000 of the tax debt relates to his business and $10,000 relates to his wages, then only two-thirds of the interest expenses would be deductible. 

 

Companies and Trusts 

If a company or trust borrows to pay its own tax debts (income tax, GST, PAYG withholding, FBT), the interest is usually deductible because the borrowing is directly related to carrying on the business. 

However, if a director or a beneficiary borrows money personally to pay the company’s or trust’s tax debts, the interest they incur is generally not deductible to them personally, the deduction is only available to the entity that incurred the tax liability. 

Practical Takeaways 

• Avoid heavily relying on ATO payment plans as a long-term solution, GIC is now a pure cost. 

• Seek advice before refinancing ATO debts to ensure any new borrowing is structured in a way that maximises potential deductibility. 

• Keep records: the ability to trace the borrowing to the underlying business tax debt is crucial. 

• Consider cash-flow planning earlier in the year to minimise exposure to GIC and SIC.