What to Expect in 2024-25

As highlighted in a $40 million public education campaign, personal income tax cuts came into effect on 1 July 2024. At the same time, the superannuation guarantee (SG) rate increased by 0.5% to 11.5%.

For employers, it’s essential to review and update your payroll system and salary sacrifice agreements. PAYG withholding will also be affected.

The ATO has recently reminded employers to be vigilant about their SG obligations:

• Ensure SG is paid to all eligible employees. The definition for SG purposes is broad and includes temporary residents, backpackers, some company directors, family members working in the business, and certain contractors. Verify that your classifications are correct.
• Confirm that employee fund details and tax file numbers are correctly provided to the super fund. It’s the employer’s responsibility to ensure SG contributions are directed to the right fund.
• SG must be paid by the quarterly due date (next due by 28 July). Missing this deadline results in the superannuation guarantee charge (SGC), which includes the overdue SG, 10% interest per annum from the start of the quarter, and an administration fee. Note that SGC is non-deductible.

As of 1 July 2024, the national minimum wage increased by 3.75% to $24.10 per hour or $915.90 per week. This increase applies from the first full pay period starting on or after 1 July. Historically, there’s been no direct correlation between minimum wage increases and inflation.

Private sector wage growth slightly decreased to 4.1% in the March 2024 quarter from 4.2% in December 2023, indicating a possible stabilisation in wage growth.

The latest NAB business survey shows a drop in business confidence, with conditions falling into negative territory in May after eight consecutive months of declining forward orders. Despite this, the labour market remains strong, with unemployment at 4% in May. Treasury forecasts a modest economic growth of 2% for 2024-25.

RBA Governor Michelle Bullock has stressed that inflation, not interest rates, drives cost of living pressures. The RBA uses interest rates as a tool to manage inflation. With inflation easing more slowly than expected, the RBA’s approach to interest rates will depend on the need to bring inflation to target.

Inflation has dropped from 7.8% in December 2022 to 3.6% in the March quarter, but rose to 4% in May, tempering expectations for an interest rate cut.

Post-pandemic, Australia experienced a surge in migration, including international students and temporary skilled workers. In the year ending 30 June 2023, net overseas migration contributed 518,000 people to Australia's population, the highest on record.

For 2024-25, net migration is expected to fall to 260,000. The government’s focus is shifting towards skilled migration, increasing employer-sponsored places by 7,175 while reducing skilled independent visas by 13,475. Additionally, the Temporary Skilled Migration Income Threshold will rise to $73,150 from 1 July 2024.