Managing a healthy cash flow is often tough for small businesses and it is particularly the case right now in these challenging economic conditions, as many businesses continue to face supply chain issues, utilities and wage cost increases, and even severe downturns for some sectors.

Cash flow management serves as the fundamental pillar of every thriving business, ensuring its longevity and prosperity. This practice entails thoroughly tracking cash movements, including inflows and outflows, to optimise cash flow strategically.

As businesses face potential rising interest rates and escalating costs, building and managing cash reserves become critical for seizing opportunities. Recent regulatory changes in this landscape may present challenges and opportunities to monitor closely.

Here are some regulatory shifts that can have an impact on your cash flow dynamics:

Minimum wage rise

The Fair Work Commission assesses the base earnings rate for workers each year, and we have seen significant increases in the last two years due to the high inflation rate. The minimum wage currently stands at $882.80 per week or $23.23 per hour after it was increased by 5.75 per cent in July 2023[i]. The federal government is expected to increase minimum and award wages to be implemented from July 2024, noting that inflation is still above the target rate of 2 to 3 per cent, posing ongoing challenges for households grappling with cost-of-living pressures[ii].

The Council of Small Business Organisations Australia, however, is pushing for a maximum 3 per cent increase in the minimum wage, citing the current economic challenges and the impacts of previous rate hikes as deterrents for wage rises surpassing the inflation rate.

CEO, Luke Achterstraat, says small businesses are already absorbing knock-on costs through increased superannuation guarantee payments, worker’s compensation, and payroll tax[iii].

Changes to employee super

The Superannuation Guarantee – the amount that employers must pay to their workers’ super funds – has increased again from 1 July 2024. Employers now need to pay 11.5 per cent of an employee’s ordinary time earnings. This amount will increase by 0.5 per cent in 2025, bringing it up to 12 per cent[iv].

Payment of the superannuation guarantee to employees should be made at least four times a year, with the payments to be made in full by the quarterly due dates, which are 28 days after the end of each financial quarter.

However, some employers – often those with cashflow issues – have been dragging the chain on payments. As a result, billions of dollars in super are owing. The Australian Taxation Office says that, in 2019-2020, $3.4 billion in employees’ super went unpaid[v].

The solution will potentially have a big effect on small business cashflow. From 1 July 2026, employees’ super must be paid at the same time they receive their wages.

The federal government is calling it ‘payday super’ and Treasurer Jim Chalmers says more frequent super payments will make payroll management smoother and employers will have fewer liabilities building up. The government is hoping the change will particularly benefit those in lower paid, casual and insecure work, who are more likely to miss out when super is paid less frequently. It will also allow employees to keep track of their payments, making it harder for them to be exploited by disreputable employers.

Instant write-offs

In May 2024, the federal government announced that it would extend the instant asset write-off by a further 12 months[vi]. The instant asset write-off allows eligible businesses to claim an immediate deduction for the cost of assets including tools, computers and office equipment, freestanding office furniture, and vehicles.

Instant asset write-off can be used for any number of assets purchased for use during the year, if the cost of each individual asset is less than the threshold of $20,000. It can also be used for second-hand assets.

However, there are some exclusions. These include some assets that are leased out, plants including grapevines, assets used in research and development activities, and capital works, such as new buildings and structural improvements.

Assets valued at $20,000 or more, which can’t be immediately deducted, can be depreciated at 15 per cent in the first income year and 30 per cent each income year after that.

Please note that as at 17 May 2024, the currently legislated instant asset write-off threshold for 1 July 2023 to 30 June 2024 is $1,000[vii].

If you would like more information on the new rules and regulations, or if you need help improving your cashflow management, contact our office today.

DISCLAIMER: All information on Focus Wealth Advisers is general in nature and does not take into account your personal objectives, financial situation or needs. You should consider your personal circumstances and seek professional advice before making any decisions based on this information.

[i] Fair Work (2024) Pay guides

[ii] ABC (2024) Government pushes for minimum wage increase to keep pace with inflation

[iii] Smart Company (2024) COSBOA: Cap minimum wage increase at 3% in “cost of doing business” crisis

[iv] ATO (2024) Super guarantee

[v] Treasury Ministers (2023) Introducing payday super

[vi] ATO (2024) Small Business Support – $20,000 instant asset write-off

[vii] TaxBanter (2024) Federal Budget 2024-25