Personal Tax & Super
As you might know, the personal income tax cuts began on 1 July 2024. At the same time, the SG rate increased to 11.5% by 0.5%. For employers, it is crucial to ensure that your payroll systems and all interactions with it are evaluated and updated. Your PAYG withholding will also be affected. The ATO has warned employers to be careful about their SG obligations.
- Are you paying SG to the right people? Backpackers, temporary residents, some company directors, some contractors and family members working in the business must be paid a super guarantee. Ensure that your classifications are accurate for SG purposes.
- Ensure that the fund details are accurate for the employee and that the tax file number of the employee has been provided to the super fund. The employer must make sure that the super guarantee for the employee is directed to the right super fund account.
- The SG must be paid by the quarterly due date into the employee’s fund. If your business fails to do it before the deadline, the SG charge applies. SG charges comprise the outstanding SG, 10% interest p.a. from the beginning of the quarter, and an administration fee. SG charges are not deductible.
Wages
The national minimum wage increased on 1 July 2024 by 3.75%. It applies from the first full pay time period beginning on or after 1 July 2024. Previously, there was no relation between an increase in minimum wages and inflation.
Yearly wage growth in the private sector decreased slightly to 4.1% in the March quarter of 2024 from 4.2% in December 2023 – the first fall since the September quarter of 2020, indicating that wage growth is starting to even out.
Interest Rates and Cost of Living
As inflation slows down more gradually than expected, the Reserve Bank of Australia is keeping its options open regarding interest rates, focusing on actions needed to meet the inflation target.
Inflation has decreased to 3.6% in the March quarter from its peak of 7.8% in December 2022 but maximised again in May to 4% dampening expectations of an interest rate reprieve.
Business Confidence
The latest NAB business survey shows a drop in business confidence, falling into negative territory in May as conditions gradually softened. Businesses are cautious after eight consecutive months of declining forward orders. GDP grew slightly in the March quarter, but per capita consumption continued to decline. However, the labour market remains strong with a 4% unemployment rate in May. Treasury forecasts a slight improvement in economic growth to 2% in 2024-25, which is modest but credible.
Migration and Labour
After the pandemic, the Australian migration level flooded with the return of international students, working holidaymakers, and an influx of temporary skilled labour to meet shortages.
For the year ending June 30, 2023, Australia’s population experienced a net gain of 518,000 people from overseas migration, marking the highest estimate of net overseas migration on record. The 2024-25 Federal Budget estimates that net migration will decrease to 260,000. After the pandemic, Australia experienced labour shortages that stopped the return and growth of supply.
Beginning January 1, 2025, there will be a limit on the number of student visas issued. Professor Michael Wesley, Deputy Vice-Chancellor at the University of Melbourne, noted a 34% decrease in student visa grants in March 2024 compared to the same period in 2023.
Employer-sponsored places will increase by 7,175, however skilled independent visas will decrease by 13,475. The minimum salary requirement to sponsor an employee will also be maximised to $73,150 on 1 July 2024.
What’s Next?
Business failures can stem from various causes, but they often begin with a lack of understanding of internal operations and essential metrics to monitor. Managers must be on top of their numbers to check and manage issues before they get out of hand.
A lack of profit will ruin your business, but not sufficient cash will kill it stone dead. Businesses frequently fail due to inadequate cash management. Plan, monitor, and measure your cash flow. This not only means closely tracking your debtor collections and inventory but also running a rolling three-month cashflow position. This should alert you regarding any brewing problems.
Cash flows, cost control, operating budgets, and debt management all must be part of your business management. The greater your control, the lower your risk exposure. Putting up your prices during tough times is not an act of social betrayal.
$20k Instant Asset Write-off Passes Parliament
Legislation raising the instant asset write-off threshold from $1,000 to $20,000 for the 2024 income year was passed by Parliament just five days before the end of the financial year. Purchases of depreciable assets with a cost of under $20,000 that a small business makes between 1 July 2023 and 30 June 2024 can be written- off in the year of purchase. It provides a significant cash flow advantage, as the tax deduction can be claimed in the year of purchase rather than spread over several years.
To qualify, the asset must be first used or installed and ready for use for a taxable purpose between July 1, 2023, and June 30, 2024. The write-off threshold applies per asset, so a small business entity can deduct the full cost of multiple assets across the 2024 year if the cost of each asset is less than $20,000. A bill is currently before Parliament to extend the increase of the instant asset write-off threshold until June 30, 2025.
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