Will 2024-25 be defined by volatility or a return to stability?

Personal Tax & Superannuation

Personal income tax reductions starting on July 1, 2024, have coincided with a 0.5% rise in the superannuation guarantee (SG) rate to 11.5%. Employers have to make sure their payroll systems—including agreements on salary sacrifice—show these changes. 

The ATO has lately underlined the need for companies to follow extraordinary guarantee requirements. For SG, an employee is defined broadly and includes temporary residents, backpackers, certain corporate directors, family members, and some contractors. 

Verify classifications for SG purposes are valid, that the employee’s tax file number and super fund information are right, and that SG payments are completed by the quarterly due date—that is, next due on July 28. 

Not tax-deductible, missing this deadline results in the super guarantee charge (SGC), including outstanding SG, 10% yearly interest, and an administrative fee.

Wages

Effective July 1, 2024, the national minimum wage increased by 3.75% to $24.10 per hour, or $915.90 per week. This rise counts from the first complete pay period beginning on or after this date. Rising minimum salaries and inflation do not particularly correlate directly. 

The annual pay increase in the private sector fell to 4.1% in March 2024 from 4.2% in December 2023, the first decline since September 2020, suggesting that pay growth has stabilised. 

Interest Rates and Living Costs

RBA Governor Michelle Bullock has underlined once again that the main cause of cost-of-living pressure is inflation rather than interest rates. The RBA controls inflation by means of interest rates. 

It returned to 4% in May, therefore dimming prospects for relief from high interest rates, even if inflation eased from a peak of 7.8% in December 2022 to 3.6% in March 2024.

Business Confidence

The latest NAB business survey suggests falling business optimism, with conditions continuing to weaken and eight consecutive months of future order decreases. Despite this, the labour market remains solid, with unemployment at 4% as of May. GDP rose modestly in the March quarter; however, consumption per capita dropped.

The Treasury anticipates a little rise in economic growth (GDP) to 2% for 2024–25, which, although minor, is plausible.

Migration & Labour

Australia’s post-pandemic migrant wave comprised overseas students, working vacationers, and temporary skilled workers. 

As of June 30, 2023, net foreign migration has contributed a record 518,000 persons to Australia’s population. The 2024–25 Federal Budget predicts net migration to reduce to 260,000. Although migratory impacts on housing are widely recognised, they have favoured labour supply.

From January 1, 2025, student visa numbers will be restricted, with a 34% decline in awards in March 2024 compared to the previous year. The government is emphasising skilled migration, boosting employer-sponsored seats by 7,175 while lowering skilled independent visas by 13,475. 

Furthermore, the minimum income requirement for sponsoring an employee (Temporary Skilled Migration Income Threshold) will increase to $73,150 on July 1, 2024.

What Now?

Businesses typically fail owing to a lack of awareness and monitoring of internal processes. Managers need to stay educated about important business drivers to solve difficulties early. Profit is very important, but inadequate cash flow may be lethal. 

Businesses should keep a rolling three-month cash flow projection to identify possible issues early on and plan, track, and measure cash flow, including debtor collections and inventory management.

Reducing company risk depends on good debt management, operational budgeting, cost control, and cash flow management. Unless they operate in very price-sensitive sectors, small firms also have to think about changing pricing in response to growing expenses.