Personal tax & super
As you may be aware (thanks to the $40 million public education campaign), personal income tax cuts became effective on 1 July 2024. At the same time, the superannuation guarantee (SG) rate jumped by 0.5% to 11.5%.
For employers, it’s crucial to ensure your payroll system and all related aspects, like salary sacrifice agreements, are updated. This change will also impact your PAYG withholding.
Speaking of obligations, the ATO has recently reminded employers to stay on top of their super guarantee duties.
- Are you paying SG to the right people? The definition of an employee for SG purposes is broad, covering temporary residents, backpackers, some company directors, family members working in the business, and some contractors. Ensure your classifications are correct.
- Check fund details and tax file numbers. You must ensure SG is directed to the correct super fund account.
- Pay SG on time. The next SG payments are due by 28 July 2024. Missing the deadline means the super guarantee charge (SGC) applies, which includes the outstanding SG, 10% interest p.a. from the start of the quarter, and an administration fee. Plus, SGC amounts are not tax-deductible.
Wages
On 1 July 2024, the national minimum wage increased by 3.75% to $24.10 per hour or $915.90 per week. This increase applies from the first full pay period starting on or after 1 July 2024. Historically, there’s no direct link between minimum wage hikes and inflation.
Annual wage growth in the private sector slightly dipped to 4.1% in the March 2024 quarter from 4.2% in December 2023, marking the first drop since September quarter 2020, suggesting wage growth is stabilising.
Interest rates and cost of living
RBA Governor Michelle Bullock has pointed out several times that inflation, not interest rates, is at the core of cost of living pressures. Interest rates are the RBA’s “blunt instrument” for managing inflation. With inflation easing slower than expected, the RBA isn’t ruling anything out regarding interest rates as they aim to bring inflation to target.
Inflation dropped from its peak of 7.8% in December 2022 to 3.6% in the March quarter but rose again in May to 4%, dampening hopes for a break in interest rate hikes.
Business confidence
The latest NAB business survey paints a grim picture. Business confidence slipped into negative territory in May as conditions continued to soften. Businesses have faced eight months of declining forward orders, making them cautious about the future. GDP grew slightly in the March quarter, but consumption per capita continued to fall.
On a positive note, the labour market is strong, with unemployment at 4% in May. Treasury forecasts economic growth (GDP) to improve slightly to 2% in 2024-25—not thrilling, but credible.
Migration & labour
Always a hot topic, post-pandemic Australia saw a surge in migration with the return of international students, working holidaymakers, and temporary skilled labour to address shortages.
In the year ending 30 June 2023, overseas migration added a net 518,000 people to Australia’s population—the highest since records began. The 2024-25 Federal Budget projects net migration to drop to 260,000. While migration pressures, especially on housing, are well-known, they have positively impacted supply by alleviating labour shortages that hampered post-COVID recovery.
Starting 1 January 2025, student visa numbers will be capped. Student visa grants are already down 34% in March 2024 compared to the same period in 2023. The government’s focus is shifting to skilled migration, with employer-sponsored places increasing by 7,175, while skilled independent visas will decrease by 13,475.
The minimum salary requirement to sponsor an employee (Temporary Skilled Migration Income Threshold) will rise to $73,150 on 1 July 2024.
What now?
Businesses often falter because they need help understanding what’s happening within their operations and what to monitor. Strategically, managers need to stay on top of their numbers to identify and manage problems early. If you don’t know your business’s key drivers, it’s time to find out (we can help with that).
Lack of profit erodes your business, but insufficient cash can kill it. Plan, track, and measure your cash flow closely, including monitoring debtor collections and inventory, and maintaining a rolling three-month cash flow position. This should give you an early warning of any brewing issues.
Cash flows, operating budgets, cost control, and debt management must be part of your business strategy. The more in control you are, the lower your risk.
Many small businesses absorb increasing costs. Raising your prices during tough times isn’t a betrayal. If your business costs have risen, you should adjust your prices unless you’re okay with making less for the same effort or in a price-sensitive industry where you must follow the lead of larger businesses.
If you need assistance understanding the latest developments impacting your business, managing your finances, or making strategic decisions, don’t hesitate to contact us. Our team is ready to help you navigate the changing landscape and empower your business for success. Contact us today to discuss how we can support your business needs.