Long-Term Debt to Total Assets Ratio in 2025: Guide for Australian Businesses

The long-term debt to total assets ratio is a critical barometer for Australian businesses, shaping everything from borrowing costs to boardroom confidence. As we move through 2025, regulatory changes and economic shifts are making this metric more important than ever. Whether you’re running a growing SME or steering a listed enterprise, understanding this ratio can help you make sharper decisions and stay ahead in a competitive market.

Why the Long-Term Debt to Total Assets Ratio Matters

This ratio measures the proportion of a company’s assets financed by long-term debt. It’s a snapshot of leverage, indicating how much risk a business is taking on and how reliant it is on external financing. Lenders, investors, and even regulators scrutinise this figure:

• Creditworthiness: A high ratio might signal risk to lenders, possibly raising borrowing costs or tightening lending criteria.

• Investor Confidence: Investors use the ratio to assess financial stability and growth prospects.

• Strategic Flexibility: The ratio influences a company’s ability to invest, pay dividends, or weather economic shocks.

In 2025, with the Australian Prudential Regulation Authority (APRA) tightening its stance on business lending standards, the spotlight on balance sheet health is brighter than ever.

How to Calculate and Interpret the Ratio

The formula is straightforward:

Long-Term Debt to Total Assets Ratio = Long-Term Debt / Total Assets

For example, if an Australian manufacturer has $8 million in long-term debt and $40 million in total assets, the ratio is 0.2 (or 20%). That means 20% of its assets are funded by long-term borrowings.

But what’s a ‘good’ ratio? It depends on your sector and strategy. Australian infrastructure companies, for instance, often carry higher ratios due to capital-intensive operations, while tech firms may run leaner. Recent 2025 ASX reports show averages ranging from 0.15 for software firms to 0.35 for construction and mining.

• Low Ratio (<0.2): Indicates conservative financing, less risk, but might signal under-leverage in growth phases.

• Moderate Ratio (0.2–0.4): Balanced leverage, common among stable, mature businesses.

• High Ratio (>0.4): Higher risk, more susceptible to interest rate hikes and cash flow pressures.

In 2025, as the RBA maintains a cautious stance on rates and business lending rates hover around 6.2% on average, companies with high ratios may feel the pinch more acutely.

2025 Policy Shifts and Real-World Examples

This year, APRA’s revised prudential standards on commercial lending have raised the bar for documentation and stress testing for loans with high leverage. For example, a Sydney-based property developer saw its refinancing application scrutinised due to a ratio above 0.45—prompting a review of asset valuations and repayment plans. Conversely, a Queensland agri-business with a 0.18 ratio secured new funding swiftly, demonstrating the advantage of a strong balance sheet.

Recent government incentives for green infrastructure projects have also encouraged some businesses to take on more debt, but only those with prudent ratios are reaping the benefits of lower interest rates and faster approvals. The message from 2025’s policy landscape is clear: healthy leverage opens doors, while over-leverage can shut them.

Practical Steps to Improve Your Ratio

• Boost Asset Base: Invest in productive assets or revalue existing ones to strengthen the denominator.

• Reduce Debt: Refinance, pay down, or restructure long-term obligations when possible.

• Monitor Regularly: Set quarterly reviews to track changes and adjust strategy proactively.

• Align with Lender Expectations: Stay updated with lender and regulatory benchmarks for your industry.

Smart businesses are using 2025’s digital accounting tools and dashboards to monitor this ratio in real-time, spotting red flags before they hit the annual report.