As you may know (especially after a $40 million public education campaign), personal income tax cuts took effect on 1 July 2024. Simultaneously, the superannuation guarantee (SG) rate increased by 0.5% to 11.5%.
For employers, it’s crucial to ensure your payroll system and all related processes, such as salary sacrifice agreements, are reviewed and updated accordingly. Your PAYG withholding obligations will also be affected.
Additionally, the ATO has recently emphasized the importance of meeting your super guarantee obligations:
- Correct Recipients: Ensure you are paying SG to the right individuals. The definition of an employee for SG purposes is broad, including temporary residents, backpackers, some company directors working in the business, family members working in the business, and certain contractors. Verify that your employee classifications for SG purposes are accurate.
- Fund Details: Confirm that the employee’s super fund details and tax file number are correctly provided to the super fund. It’s the employer’s responsibility to direct SG to the correct super fund account.
- Payment Deadlines: Make sure SG payments are made into the employee’s fund by the quarterly due date (the next SG payments are due by 28 July). Missing the deadline incurs the super guarantee charge (SGC), which consists of the outstanding SG, 10% interest per annum from the start of the quarter, and an administration fee. Unlike regular SG contributions, SGC amounts are not 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 is no direct correlation between increases in minimum wages and inflation.
In the private sector, annual wage growth slightly declined to 4.1% in the March quarter of 2024, down from 4.2% in December 2023. This marks the first decline since the September quarter of 2020, indicating that wage growth is beginning to stabilise.
Interest rates and cost of living
(RBA) Governor Michelle Bullock has emphasized that inflation, rather than interest rates, is the primary driver of cost of living pressures. Interest rates are the RBA’s “blunt instrument” for controlling inflation. With inflation easing more slowly than expected, the RBA is keeping all options on the table, as the future path of interest rates will depend on the measures needed to bring inflation back to target.
Inflation has decreased from its peak of 7.8% in December 2022 to 3.6% in the March quarter, but it rose again to 4% in May, reducing expectations for an imminent interest rate reprieve.
Business confidence
The latest NAB business survey paints a grim picture, showing that business confidence fell back into negative territory in May as conditions continued to gradually weaken. With forward orders declining for eight consecutive months, businesses are understandably cautious about the future. GDP saw only marginal growth in the March quarter, and per capita consumption continued to decline.
On a brighter note, labor market conditions remain strong, with unemployment holding steady at 4% in May. The Treasury forecasts a slight improvement in economic growth (GDP) to 2% in 2024-25—modest, but credible.
Migration & labour
Our immigration levels surged post-pandemic with the return of international students, working holidaymakers, and an influx of temporary skilled labor to address shortages. For the year ending 30 June 2023, overseas migration added a net gain of 518,000 people to Australia’s population, marking the largest net overseas migration estimate on record.
The 2024-25 Federal Budget projects net migration will decrease to 260,000. While the demand pressures from migration, especially on housing, have been widely publicized, the positive impact was on supply. Post-COVID, Australia faced severe labor shortages that hindered the return and growth of supply.
Starting 1 January 2025, student visa numbers will be capped. According to University of Melbourne Deputy Vice-Chancellor Professor Michael Wesley, student visa grants were already down 34% in March 2024 compared to the same period in 2023.
The Government is shifting focus to skilled migration, with employer-sponsored places increasing by 7,175, though skilled independent visas will decrease by 13,475. Additionally, 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 fail or struggle due to a lack of understanding and monitoring of critical aspects within the business. Managers must keep track of key metrics to identify and address issues early. Knowing the key drivers of your business is essential, and assistance is available to help with this.
A lack of profit can weaken a business, but insufficient cash flow can be fatal. Effective cash management, including planning, tracking, and measuring cash flow, is crucial. This involves closely monitoring debtor collections and inventory, and maintaining a rolling three-month cash flow projection to detect potential problems early.
Key elements of business management include cash flows, operating budgets, cost control, and debt management. Maintaining control over these aspects reduces risk.
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