As we look ahead to 2024-25, many businesses and individuals are wondering whether we’ll face another year of volatility or see a return to stability. The financial landscape is poised for several key changes that will impact personal tax, superannuation, wages, interest rates, and overall business confidence.
Personal Tax & Super
One of the most significant changes for individuals and businesses alike is the introduction of personal income tax cuts, effective from July 1, 2024. This change is part of a broader public education campaign costing $40 million. Alongside these tax cuts, the superannuation guarantee (SG) rate has increased by 0.5% to 11.5%.
For businesses, it’s essential to ensure that payroll systems and related agreements, such as salary sacrifice arrangements, are updated to reflect these changes. Adjustments to PAYG withholding will also be necessary.
The Australian Taxation Office (ATO) has emphasised the importance of employers meeting their super guarantee obligations. This includes ensuring that super is paid to all eligible employees, including temporary residents, backpackers, certain company directors, and family members working in the business. Accurate fund details and timely SG payments are crucial to avoid penalties.
Wages
On July 1, 2024, the national minimum wage increased by 3.75%, bringing it to $24.10 per hour or $915.90 per week. Despite this increase, there is traditionally no direct correlation between rising minimum wages and inflation. However, the slight decline in private sector annual wage growth to 4.1% in the March quarter of 2024 suggests that wages growth is stabilising.
Interest Rates and Cost of Living
Reserve Bank of Australia (RBA) Governor Michelle Bullock has reiterated that inflation, rather than interest rates, is the primary driver of cost of living pressures. The RBA uses interest rates as a tool to control inflation. Although inflation has decreased from its peak of 7.8% in December 2022 to 3.6% in the March quarter of 2024, it rose again to 4% in May. This fluctuation dampens hopes for a significant reduction in interest rates.
Business Confidence
The latest NAB business survey reveals a decline in business confidence, which has slipped into negative territory as conditions continue to soften. Businesses are cautious, having experienced eight consecutive months of declining forward orders. Although GDP growth was marginal in the March quarter, and per capita consumption declined, the labour market remains strong with unemployment at 4% as of May 2024.
Treasury forecasts suggest a slight improvement in economic growth (GDP) to 2% for 2024-25, which, while not thrilling, is a credible projection.
Migration & Labour
Post-pandemic, Australia has seen a surge in migration, particularly with the return of international students, working holiday makers, and temporary skilled labour. In the year ending June 30, 2023, net overseas migration contributed a record gain of 518,000 people to Australia’s population.
However, the 2024-25 Federal Budget projects a decrease in net migration to 260,000. While migration has added demand pressures, particularly on housing, it has also alleviated labour shortages. From January 1, 2025, student visa numbers will be capped, and student visa grants have already dropped by 34% in March 2024 compared to the previous year. The government is shifting its focus to skilled migration, increasing employer-sponsored places but reducing skilled independent visas.
The minimum salary requirement for sponsoring an employee will increase to $73,150 from July 1, 2024.
What Now?
Businesses often struggle due to a lack of understanding of their internal dynamics and key performance indicators. To thrive, it’s crucial to stay on top of your numbers, from profit margins to cash flow management. Inadequate cash management can be fatal to businesses. Planning, tracking, and measuring cash flow is essential, including managing debtor collections, inventory, and maintaining a rolling three-month cash flow position to anticipate problems.
Comprehensive business accounting practices, such as operating budgets, cost control, and debt management, can help mitigate risks. Small businesses, in particular, should consider adjusting prices to reflect increased operating costs. This strategic approach ensures sustainability without compromising profitability.
For businesses on the Gold Coast or elsewhere, seeking guidance from an accountant can provide invaluable support in navigating these changes. An accountant can help you adapt to new tax regulations, optimise business accounts, and ensure compliance with superannuation obligations. By leveraging accountant tax expertise, businesses can better prepare for the financial year ahead.
Book a consult with us today https://amarose.com.au/contact/
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