Law changes that every small business needs to know
Legislation is everchanging, in order to keep up with societal and economic changes. It’s crucial, as business owners, to stay up to date and compliant with legislative changes which affect your business.
This insight delves into the new laws that came into effect on 1 July 2023, which are likely to impact small business owners and employees in Australia.
- Employers should review current pay rates to ensure they are paying employees in line with the new minimum pay rate.
- Employers should ensure they apply the new 11% rate to their employees’ superannuation, in line with incremental 0.5% annual increases which are to take place up to 2025.
- Parents taking parental leave are now entitled to claim up to 20 weeks of paid parental leave.
- Business owners will now be granted incentives as part of a means to support cash flow and keep up with inflation, which include:
- Business asset deductions of up to $20,000 per asset;
- Reduction of PAYG and GST uplift rates; and
- Additional tax reduction for eligible assets relating to energy use.
New laws as of effect 1 July 2023
Here is a rundown of the key changes affecting small business owners:
- New minimum wages
The new national minimum wage has increased to $882.80 per week, being $23.23 per hour, based on a full-time working week.
As a business owner you must ensure that your employees are being paid the up to date minimum wage.
- Super guarantee rate increase
The super guarantee rate increased from 10.5% to 11 % on 1 July 2023. The reason for the increase is part of an incremental increase that will take place by increasing the rate by 0.5% annually until it reaches 12% by 1 July 2025.
The new 11% rate must be applied to all salary and wages paid on and after 1 July 2023, even if some or all of the pay period relate to a time before 1 July 2023.
- Amended paid parental leave
The current paid parental leave entitlement for Australians is 18 weeks. As of 1 July 2023, this is now combined with the dad and partner pay entitlement of 2 weeks, to provide partnered couples the ability to claim up to 20 weeks of paid parental leave between them. These changes stem from the Houses passing the Fair Work Legislation Amendment (Protecting Worker Entitlements) Bill 2023 on 22 June 2023, to amend the Fair Work Act 2009 (Cth).
A single parent can claim the full 20 weeks of paid parental leave.
The new changes include:
- Introducing a $350,000.00 family income limit for claiming paid parental leave pay;
- Allowing both parents to commence parental leave at any time within the 24 months period following the birth of their child;
- Increasing the number of flexible parental leave days parents can take from 30 days to 100 days over the 24 month period; and
- Removing the requirement to return to work to be eligible for the entitlement.
All employers should review their parental leave policies and practices as a matter of priority, to ensure they are compliant with these changes which commenced on 1 July 2023.
- Federal Budget commitments
The federal government, as part of the federal budget, announced the following measures to take effect from 1 July 2023.
Increase to instant asset write off
Eligible small business owners can now deduct up to $20,000.00 per business asset or resource for the 2023/24 tax year using the instant asset write-off, allowing small businesses to instantly write off multiple assets. The purchases must, however, be installed and ready to use in the business between 1 July 2023 and 30 June 2024.
To be eligible, small businesses must have less than a $10 million aggregated turnover.
The end of temporary full expensing
In summary, temporary full expensing was introduced temporarily by the Australian Government, to allow businesses to claim an immediate deduction of the full cost of eligible assets of any value in the year they are first held, first used, or installed ready for use for a taxable purpose, to help businesses recover from the impact of COVID-19.
PAYG and GST Adjustment factor
From 1 July 2023, the gross domestic product (GDP) adjustment factor of 6% (reduced from 12%) will apply for the 2023–24 income year. This is used by the ATO to work out quarterly GST and PAYG instalment amounts. It was announced in the 2023–24 Federal Budget.
To be eligible, small businesses or individuals can have up to $10 million aggregated turnover for GST instalments, and up to $50 million annual aggregate turnover for PAYG instalments.
The reduced adjustment factor will provide cash flow support to small businesses and other PAYG instalment taxpayers.
Small business energy incentive
The tax incentive for small businesses will provide an additional 20% tax reduction of up to $20,000.00 for eligible assets that support electrification and energy efficient use. This measure will help small businesses make investments such as:
- Electrifying their heating and cooling systems;
- Upgrading to more energy efficient fridges and induction cooktops; and
- Installing batteries and heat pumps.
If you need further information or advice on your obligations as a business owner during the next financial year, contact us today on (02) 9189 5288.
Craig Higginbotham and Nicole Sarraf
10 July 2023