Personal Tax and Super
The personal income tax cuts that came into effect on 1 July 2024, alongside the 0.5% increase in the superannuation guarantee (SG) rate to 11.5%, mark significant changes. Employers must ensure payroll systems, including salary sacrifice agreements, are updated accordingly. Your PAYG withholding will also be impacted.
Super Guarantee obligations
The ATO has recently emphasised vigilance in super guarantee obligations.
Employers must:
- Pay super guarantee to the correct individuals, including typical employees, temporary residents, backpackers, some company directors, and family members working in the business.
- Ensure that the super guarantee is paid into the correct fund with accurate details by the quarterly due date to avoid the non-deductible super guarantee charge (SGC), which includes outstanding SG, 10% interest p.a., and an administration fee.
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 entire pay period starting on or after 1 July 2024. Despite common misconceptions, there's traditionally no direct correlation between minimum wage increases and inflation.
Interest rates and cost of living
RBA Governor Michelle Bullock has reiterated that inflation, rather than interest rates, is the core issue affecting the cost of living. Interest rates are used as a tool to manage inflation. Although inflation reduced from its peak of 7.8% in December 2022 to 3.6% in the March quarter, it increased again to 4% in May, suggesting no immediate interest rate relief.
Business confidence dips
The latest NAB business survey indicates a dip in business confidence, falling into negative territory in May as conditions softened. Despite marginal GDP growth in the March quarter and strong labour market conditions, with unemployment at 4% in May, businesses remain cautious due to continuous declines in forward orders. Treasury forecasts economic growth to marginally improve to 2% in 2024-25.
Focus on skilled migration
Post-pandemic, Australia experienced a surge in migration, with a net gain of 518,000 people by June 2023, driven by international students, working holidaymakers, and temporary skilled labour. However, the 2024-25 Federal Budget estimates net migration to fall to 260,000. From 1 January 2025, student visa numbers will be capped, reflecting a strategic focus on skilled migration with an increase in employer-sponsored places and a reduction in skilled independent visas.
How to thrive
To thrive in 2024-25, businesses must understand and monitor key drivers such as cash flow, operating budgets, cost control, and debt management. Cash flow management is critical - meticulously plan, track, and measure it. Additionally, businesses should not hesitate to adjust prices to reflect increased operational costs unless constrained by market conditions.
