Personal Tax and Superannuation
As of 1 July 2024, personal income tax cuts are now active. Additionally, the superannuation guarantee (SG) rate has increased by 0.5% to 11.5%. Employers need to update their payroll systems, including salary sacrifice agreements, to accommodate these changes. PAYG withholding will also be affected.
The ATO has reminded employers to ensure they are meeting their super guarantee obligations. The definition of an employee for SG purposes is broad, including temporary residents, backpackers, certain company directors, family members working in the business, and some contractors. Make sure your classifications are accurate.
Employers must verify that the correct fund details and tax file numbers are provided to the super fund for their employees. SG payments must be made into the employee’s fund by the quarterly due date, with the next payments due by 28 July. Missing the deadline incurs the super guarantee charge (SGC), which includes the outstanding SG, 10% annual interest from the start of the quarter, and an administration fee. SGC amounts are not tax-deductible.
Wage Increases
From 1 July 2024, the national minimum wage has increased by 3.75% to $24.10 per hour, or $915.90 per week. This increase applies from the first full pay period on or after 1 July 2024. Typically, there is no direct link between minimum wage increases and inflation.
Private sector annual wage growth slightly decreased to 4.1% in the March quarter of 2024 from 4.2% in December 2023, indicating that wage growth may be stabilizing.
Interest Rates and Cost of Living
RBA Governor Michelle Bullock has highlighted that inflation is the main cause of cost of living pressures, not interest rates. Interest rates are used by the RBA to control inflation. Since inflation is easing more slowly than expected, the RBA may make further adjustments. Inflation dropped from 7.8% in December 2022 to 3.6% in the March quarter but rose again to 4% in May, affecting hopes for stable interest rates.
Business Confidence
The latest NAB business survey shows a decline in business confidence, which fell into negative territory in May as conditions continued to soften. Businesses have faced eight consecutive months of declining forward orders, leading to a cautious outlook. GDP saw marginal growth in the March quarter, while per capita consumption continued to decline. However, the labor market remains strong, with unemployment at 4% in May.
Treasury forecasts a slight improvement in economic growth (GDP) to 2% in 2024-25, a modest but credible outlook.
Migration and Labor
Post-pandemic, Australia saw a surge in migration with the return of international students, working holiday makers, and temporary skilled labor to address shortages. In the year ending 30 June 2023, overseas migration added a net gain of 518,000 people to Australia’s population, the highest on record.
The 2024-25 Federal Budget estimates a drop in net migration to 260,000. While migration pressures on housing have been well-publicized, the positive impact on labor supply was significant. Post-COVID, Australia faced severe labor shortages that hindered supply chain recovery.
From 1 January 2025, student visa numbers will be capped. Student visa grants were already down 34% in March 2024 compared to the same period in 2023. The government’s focus is shifting towards skilled migration, with an increase of 7,175 employer-sponsored places, although skilled independent visas will decrease by 13,475. The minimum salary requirement for sponsoring an employee (Temporary Skilled Migration Income Threshold) will rise to $73,150 from 1 July 2024.
Strategic Business Management
Businesses often fail because they don’t understand or monitor their operations effectively. Managers need to stay on top of their numbers to identify and address issues early. Profitability issues can weaken a business, but cash flow problems can be fatal. It’s crucial to plan, track, and measure cash flow, including managing debtor collections and inventory and maintaining a rolling three-month cash flow position to provide early warnings of potential problems.
Effective business management also involves overseeing cash flows, operating budgets, cost control, and debt management. By maintaining control over these areas, businesses can reduce their risk exposure.
Small businesses often absorb increasing costs. Raising prices during challenging times is not a betrayal; it’s a necessity. If the cost of doing business rises, this should be reflected in pricing unless the business can afford to make less for the same effort or is in a highly price-sensitive industry following the lead of larger competitors.
Pitt Martin Group is a CPA accounting firm, providing services including taxation, accounting, business consulting, self-managed superannuation funds, auditing and mortgage & finance. We spend hundreds of hours each year on training and researching new tax laws to ensure our clients can maximize legitimate tax benefit. Our contact information are phone +61292213345 or email info@pittmartingroup.com.au. Pitt Martin Group is located in the convenient transportation hub of Sydney’s central business district. Our honours include the 2018 CPA NSW President’s Award for Excellence, the 2020 Australian Small Business Champion Award Finalist, the 2021 Australia’s well-known media ‘Accountants Daily’ the Accounting Firm of the Year Award Finalist and the 2022 Start-up Firm of the Year Award Finalist, and the 2023 Hong Kong-Australia Business Association Business Award Finalist.
Pitt Martin Group qualifications include over fifteen years of professional experience in accounting industry, membership certification of the Australian Society of Certified Practising Accountants (CPA), Australian Taxation Registered Agents, certified External Examiner of the Law Societies of New South Wales, Victoria, and Western Australia Law Trust Accounts, membership certification of the Finance Brokers Association of Australia Limited (FBAA), Registered Agents of the Australian Securities and Investments Commission (ASIC), certified Advisor of accounting software such as XERO, QUICKBOOKS, MYOB, etc.
This content is for reference only and does not constitute advice on any individual or group’s specific situation. Any individual or group should take action only after consulting with professionals. Due to the timeliness of tax laws, we have endeavoured to provide timely and accurate information at the time of publication, but cannot guarantee that the content stated will remain applicable in the future. Please indicate the source when forwarding this content.
By Yvonne Shao @ Pitt Martin Tax
