With Australian National Audit Office data showing small businesses account for $35.9 billion of the Australian Taxation Office's $54.2 billion collectable tax debt, business recovery and insolvency firm Jirsch Sutherland is urging owners to act quickly.
"What starts as a company debt doesn't necessarily stay a company debt," Jirsch Sutherland partner Malcolm Howell said.
Once a director's penalty notice is issued, the risk to personal assets rises significantly.
"Add personal guarantees into the mix and business owners can quickly find their own assets exposed," he said.
Businesses were being squeezed by rising rents, higher operating and borrowing costs, payroll tax, land tax and the recent introduction of Payday Super.
Company insolvencies have remained stubbornly high, with construction, hospitality and retail businesses under particular pressure, according to recent Australian Securities and Investments Commission data.
More than 800 construction businesses went into administration or had controllers appointed in the 2026 financial year, compared with almost 600 accommodation and food services businesses and 351 retail trade companies.
Roughly 3900 businesses went into administration nationwide, down from more than 5000 in the previous financial year.
The recent data was a "warning shot over the bow" for small businesses carrying significant tax debt.
"The ATO is under pressure to recover more outstanding tax debt, and it's using all of the tools it has available," Mr Howell said.
"If you're carrying significant tax debt, now is the time to deal with it."
Meanwhile, credit demand has highlighted the divide between big businesses and smaller players, with loan applications for larger organisations growing 7.8 per cent in the 12 months to June, as SME loan growth was almost flat at 0.5 per cent, Equifax data shows.
Under the surface was a clear and continuing two-speed economy, the credit reporting body's commercial general manager Brad Walters said.
"Large enterprises still have the financial runway to borrow and expand," Mr Walter said.
"Small business owners are actively halting upgrades to machinery and vehicles, possibly to protect immediate cash reserves."
Furthermore, owners' missed mortgage payments underscored Jirsch Sutherland's warnings on the links between business costs and personal assets.
"The financial pressure facing small business owners has now followed them home, noted with SME owners having personal home loan delinquencies four basis points higher than regular mums and dads," Mr Walters said.
Small business owners' home loan delinquencies were four basis points higher than the general public, and they carried mortgages roughly 50 per cent larger than non-business owners, averaging $585,000 compared to $379,000.
"This could be an indication that many small business owners are making tough choices, possibly delaying their own personal mortgage payments to keep their businesses running," Mr Walters said.
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