(And, some options to consider)

Wages

The minimum wage will increase by 3.5% from 1 July 2018, lifting weekly rates by around $24.30 to $719.20 per week (might vary slightly according to the applicable Award).   The minimum wage is set at 60% of the median wage (statistically the "middle value of a series of values arranged by size").

The Fair Work president said the increase is not inflationary and unlikely to "have any measurable negative impact".

If this increase applies to your business you should also look at the effect it may have on your business and profit.   Suppliers charges and expenses will be increased as it is not likely that both big and small business will be able to absorb the extra cost, and your own wages costs will also increase.   There is a limit to cost cutting, so you need to consider increasing your prices.

If your present margin (gross profit over sales) is 35% and you increase prices by 4%, total sales could decline by 10% before your gross profit would be reduced.   Alternatively, if your costs rise by 4%, you must increase sales by 13% in order to maintain the same gross profit margin of 35%.   What this implies, and research supports, is that you are unlikely to lose 10% of your sales volume.

One easy (sort of!) way of discovering more profit is with a Profit Improvement meeting/plan.   Amazing the difference an hour can make, to look at the combination of prices, margin, and costs over twelve or more months.   It's worth it to have a meaningful goal and knowing how to achieve it, as well as for the peace of mind from having fewer problems and more cash.   Call me if you'd like to know more on how this can be achieved.

Superannuation Amnesty

The government plans to introduce a 12 months amnesty for employers who have not met the superannuation guarantee requirements in the past.   It is to apply from 24 May 2018 until 23 May 2019.

Various reports have estimated that up to a third of employers either fail to pay the 9.5% levy, or make mistakes in calculation and payment.   The introduction of digital reporting and payment may have reduced this somewhat, but potentially there is still a big shortfall from prior years.

The legislation proposes:

- The employer can claim a tax deduction for payments of the SG amounts made during the amnesty period.   (This is a huge concession, normally payments made late are not tax deductible).

- Certain penalties and fees that would otherwise apply in relation to historical SG non-compliance will be reduced to nil, such as the additional administrative components and penalties for failure to lodge SG statements on time.

To qualify for the amnesty, employers must make a voluntary disclosure during the amnesty period of an amount of SG shortfall and make payment of the SG amounts.   An employer qualifies for the amnesty if it discloses in the approved form the SG shortfall, and the ATO has not before the disclosure informed the employer that it is examining its SG situation.

This is a major concession, especially where multiple years may be involved, for tax deductibility and reduction of penalties.   Forms should soon be available, but no doubt it will be similar to the Quarterly SG Report.   The ATO has been allocated additional funds to recover unpaid super and will likely target shortfalls in its audit activity, which would then be not deductible.

Please check past payments and if you believe there may have been a shortfall, consider applying during this amnesty.   Remember, individual contractors can be covered by superannuation, as are company directors and casuals.   Please contact us if you would like to discuss this concession.

Personal Superannuation Contributions 2017/18

Legislation has just passed that will allow personal superannuation   contributions in 2017/18 as a deduction against salary and wage income.   Previously, a taxpayer could not claim a deduction if more than 10% of his personal income was received from employment, and this condition is now removed as at 1 July 2017.

The conditions for deduction are:

- Maximum contribution for the year is $25,000 (including employer and other contributions, from all sources)

- Be under the age of 75, and meet the work test if between 65 and 74

- Paid to a complying fund before 30 June, and completion of a 'Notice of Intention to Claim' to the fund before the tax return is lodged.