Understanding Non-Operating Expenses in 2025: What Australian Businesses Need to Know

Every business leader focuses on revenue and core expenses, but it’s the non-operating expenses that can sneak up and take a bite out of profits. In 2025, with new reporting standards and economic pressures, understanding these costs is more crucial than ever for Australian companies.

What Are Non-Operating Expenses?

Non-operating expenses are costs that aren’t directly tied to your business’s core operations. Unlike salaries, inventory, or marketing, these are costs that arise from activities outside your usual business activities. Common examples include:

• Interest payments on business loans

• Losses from asset sales

• Foreign exchange losses (increasingly relevant in 2025 with currency volatility)

• Legal settlements

• Write-offs of obsolete inventory or bad debts

For example, if your construction business sells an old piece of equipment at a loss, that loss is a non-operating expense. If you’re hit with an unexpected legal settlement, that’s another non-operating cost that impacts your net profit, but not your operating profit.

Why Non-Operating Expenses Matter More in 2025

This year has brought several policy and regulatory shifts that make tracking non-operating expenses more important:

• Australian Accounting Standards Update (AASB 2025): There’s a renewed focus on transparency, requiring businesses to separate non-operating expenses more clearly in financial reports. This means your bottom line could look different to lenders and investors if these costs aren’t managed well.

• Rising Interest Rates: The RBA’s rate hikes in late 2024 mean interest payments on business debt have surged. For businesses with variable-rate loans, non-operating expenses from interest could be up 20% or more year-on-year.

• Currency Fluctuations: Ongoing global uncertainty has caused the AUD to swing, making foreign exchange losses a bigger risk for importers and exporters.

Consider a mid-sized Melbourne importer: with the AUD dropping 8% against the USD since January 2025, their foreign exchange losses on USD-denominated payables have jumped, adding a significant non-operating expense to their financials.

How to Minimise and Manage Non-Operating Expenses

While some non-operating expenses are unavoidable, a proactive approach can help you keep them under control. Here are key steps for 2025:

• Review and Restructure Debt: With higher interest rates, review loan terms and consider locking in fixed rates where possible. Explore refinancing options to reduce interest expenses.

• Hedge Currency Exposure: Use forward contracts or options to limit the risk of foreign exchange losses if you deal with overseas suppliers or clients.

• Audit Non-Core Assets: Regularly assess equipment and assets for potential losses from sales or write-downs. Plan asset disposals strategically to minimise unexpected hits.

• Monitor Legal and Compliance Risks: Invest in robust compliance programs and legal reviews to avoid costly settlements and penalties.

• Leverage Technology: New accounting software in 2025, such as cloud-based platforms with AI-powered expense categorisation, can help you track and report non-operating expenses more accurately.

Staying on top of these costs isn’t just about good accounting – it’s about protecting your business’s financial health and making smarter strategic decisions.

The Bottom Line for Australian Businesses

In the ever-evolving landscape of 2025, non-operating expenses are a key factor in your financial story. They may not be as visible as payroll or marketing spend, but left unchecked, they can quietly erode profits and undermine growth. With higher interest rates, volatile markets, and tighter reporting rules, now is the time to put non-operating expenses under the microscope and ensure they don’t catch you off guard.