As we enter the new financial year, several significant changes are set to impact Australian businesses, ranging from wage increases to adjustments in superannuation contributions and thresholds. Staying informed and prepared for these updates is crucial for compliance and optimal financial management.
AFP Accounting is here to guide you through these changes and ensure your business continues to operate efficiently and compliantly.
1. Wage Increases Impact on Payroll
The Fair Work Commission has announced an increase in minimum wages, which will affect the payroll operations of many businesses across Australia. This change not only impacts the wages of minimum wage employees but also has a ripple effect through payroll calculations, tax withholdings, and superannuation contributions.
On 1 July 2024, the National Minimum Wage increased to $915.90 per week or $24.10 per hour. Award minimum wages increased by 3.75%.
What You Need to Do:
- Update Payroll Systems: Ensure your payroll software is updated to reflect the new wage rates before processing payments in the new financial year.
- Communicate with Employees: It’s important to inform your employees about how these changes will affect their pay. Clear communication helps manage expectations and maintain good employee relations.
- Review Employment Contracts: Check if employment contracts need updating or if additional adjustments need to be made for salaries that are above the minimum wage.
2. Changes to Car Thresholds
The Australian Taxation Office (ATO) adjusts the car cost limit for depreciation annually. For the new financial year, the limit has been increased to $69,674 for 2024–25. This adjustment affects the maximum tax deduction claimable for the cost of a passenger vehicle.
For the 2024–25 income year, the maximum GST credit you can claim is $6,334 (that is, 1/11 × $69,674). The Luxury Car Tax threshold is:
- $91,387 for fuel-efficient vehicles. This is in line with an increase to the motor-vehicle purchase sub-group of the Consumer Price Index (CPI)
- $80,567 for all other luxury vehicles, in line with an increase in the ‘All Groups’ CPI.
What You Need to Do:
- Adjust Depreciation Schedules: Businesses using business vehicles need to adjust their depreciation schedules according to the new car cost limit for new vehicles purchased. You do not need to adjust depreciation schedules for existing vehicles.
- Plan Purchases Strategically: If you are considering purchasing new business vehicles, understanding the new thresholds can influence timing and budgeting decisions.
3. Superannuation Rate Increases
The superannuation contribution rate will see an increment this financial year to 11.5%. This is part of the government’s strategy to increase the rate to 12% by July 2025.
What You Need to Do:
- Update Payroll Contributions: Adjust your payroll settings to account for the increased superannuation contribution rate to ensure compliance.
- Employee Communication: Inform your employees about how this increase will affect their gross salary and take-home pay. For some, higher super contributions might mean a slight reduction in their take-home pay.
4. Superannuation Cap Increases
The superannuation caps, including the concessional and non-concessional contributions caps, have been increased. These caps dictate how much money individuals can contribute to their superannuation funds at lower tax rates.
Concessional (pre-tax) contributions have increased to $30,000 per year. Therefore so has the ‘carry-forward contributions’, which allow retrospective payments of up to five years of unused concessional contribution cap.
Non-concessional (post-tax) contributions (NCCs) have increased to $120,000 per year. This increases the ‘bring-forward arrangement’, which allows contributions of up to three years’ worth of NCCs in a single year, to $360,000.
What You Need to Do:
- Advise Employees on Contribution Strategies: With the increase in super caps, employees may want to adjust their contribution strategies. Offer guidance or access to financial advice to help them make informed decisions.
- Review Salary Sacrifice Arrangements: If your employees have salary sacrifice arrangements in place, review these to ensure they maximise the new caps without exceeding them.
5. Tax Bracket Changes
The Australian Government has implemented the stage 3 tax cuts and refined the tax brackets to be the following:
| Taxable income | Tax on this income |
| $0 to $18,200 | Nil |
| $18,201 – $45,000 | 16c for each $1 over $18,200 |
| $45,001 – $135,000 | $4,288 plus 30 cents for each $1 over $45,000 |
| $135,001 – $190,000 | $31,288 plus 37 cents for each $1 over $135,000 |
| $190,001 and over | $51,638 plus 45 cents for each $1 over $190,000 |
Note: The above rates do not include the Medicare levy of 2%
What You Need to Do:
- Review Tax Liabilities: Businesses should assess the impact of any changes in tax brackets on their financial planning and employee payroll withholdings.
- Update Payroll Systems: Ensure that payroll systems are updated to incorporate the new tax rates, ensuring accurate withholdings and compliance with tax laws.
- Employee Communication: Clearly communicate any changes in tax withholdings to your employees, helping them understand their net pay adjustments.
6. Business Licence Renewals
Many business licences and permits have renewal dates aligned with the financial year. Staying current with necessary licences is crucial for uninterrupted business operations and legal compliance.
What You Need to Do:
- Audit Current Licences: Conduct a thorough review of all current business licences and permits to ensure they are up to date and identify any that require renewal.
- Plan for Renewals: Schedule and budget for renewals in advance to avoid last-minute hassles and potential penalties for lapsed licences.
- Seek Professional Advice: If unsure about the specific licensing requirements for your business, consult with legal experts to avoid compliance issues.
7. Single Touch Payroll (STP) Phase 2 Enforcement
The ATO has moved forward with the enforcement of Single Touch Payroll Phase 2, requiring more detailed payroll reporting from employers. This phase includes the need to report additional items such as income types and country codes.
What You Need to Do:
- Upgrade Payroll Software: Ensure that your payroll software supports STP Phase 2 reporting requirements. Most major payroll software providers should offer updates or modules to comply with these new reporting standards.
- Train Payroll Staff: Provide training for your payroll team on the new STP Phase 2 requirements to ensure they are confident in using the new system and understand the additional reporting items.
- Monitor Compliance: Regularly review your payroll reports to ensure they meet the STP Phase 2 requirements and address any discrepancies promptly.
8. Unfair Dismissal Threshold Raised
The threshold for what constitutes a high-income earner has been raised from $167,500 to $175,000. This change affects which employees can lodge an unfair dismissal claim under the Fair Work Act, though it’s important to note that employees above this threshold still have access to the Act’s general protection provisions.
What You Need to Do:
- Update HR Policies: Review and update your human resources policies to reflect the new threshold for unfair dismissal eligibility.
- Communicate Changes to Staff: Ensure that all HR personnel are aware of the change and communicate this to employees, especially those whose earnings are around the threshold.
- Review Employee Contracts: To clarify their rights and obligations under the new regulation, it might be necessary to review and, if applicable, update contracts for employees near or above the new threshold.
9. The Right to Disconnect Becomes Law
In an era where work-life balance is increasingly prioritised, the new ‘Right to Disconnect’ law grants employees the legal right to disconnect from work-related communications after hours. This law aims to protect employees from burnout and ensure that personal time remains undisturbed by work obligations.
What You Need to Do:
- Update Company Policies: Revise work policies to reflect the new Right to Disconnect law. Clearly define out-of-hours expectations for employees and managers.
- Communicate Changes: Ensure that all staff are informed about the new policies. Training sessions can help managers understand how to respect this right and handle urgent needs without infringing on the policy.
- Monitor and Enforce Compliance: Regularly review compliance with the Right to Disconnect policy to ensure it is being respected across the organisation. Implement mechanisms to address violations effectively.
10. Changes to the Government’s Paid Parental Leave Payments
The government has made adjustments to the Paid Parental Leave scheme to provide greater flexibility and support for families. These changes aim to enhance the accessibility and utility of the scheme for parents.
Eligible employees who are the carer of a child born or adopted from 1 July 2024 can get up to 22 weeks’ Parental Leave Pay.
What You Need to Do:
- Review New Provisions: Familiarise yourself with the updated details of the Paid Parental Leave payments to understand how changes might affect your employees and payroll operations.
- Update HR Documentation: Adjust your human resources documents and employee handbooks to incorporate the new Paid Parental Leave provisions.
- Inform Eligible Employees: Communicate the changes to your staff, particularly those who are planning or are currently on parental leave, to ensure they can benefit from the updated scheme.
11. Closing Loopholes Provisions
New legislative measures have been introduced to close loopholes that previously allowed businesses to avoid certain taxes or regulatory responsibilities. These provisions are designed to enhance fairness and ensure all businesses contribute appropriately to public revenues and comply with regulatory standards. One of these provisions is the Same Job, Same Pay legislation.
What You Need to Do:
- Consult With Legal and Financial Advisors: Engage with professionals to understand the implications of these new provisions for your business. This will help you adjust your financial practices to remain compliant with the updated laws.
- Revise Financial Strategies: Review and possibly revise your business’s financial and tax strategies to align with the new legal landscape, ensuring that all practices are above board and in full compliance.
- Communicate Changes to Stakeholders: If these changes impact how your business operates, communicates, or reports financial data, inform relevant stakeholders to maintain transparency and trust.
Maintain Compliance for a Prosperous Financial Year
The new financial year brings a variety of challenges and opportunities for Australian businesses. These important changes can significantly impact your business’s payroll and financial planning.
By preparing for these changes, you can ensure compliance, optimise financial strategies and maintain smooth operational workflows. Navigating regulations is critical for maintaining your business’s compliance and fostering a supportive workplace.
AFP Accounting is committed to helping businesses navigate these changes. We offer expert advice and tailored accounting solutions to ensure that your business not only meets its regulatory obligations but also thrives in the new financial year.
Contact us today to learn more about how we can assist you in adapting to these changes effectively.
