End of Financial Year changes for small business

Australian Small Business and Family Enterprise Ombudsman Bruce Billson interview with Selina Green on ABC Radio SA South East.

Subject: End of Financial Year changes for small business

Selina Green

The end of the financial year is just around the corner. Maybe you’ve been bombarded with messages about end of financial year sales. Sales, get them now. But if you’re in small business, if you manage or operate one of which make up the majority of businesses across our region, there are some serious things that you do need to know that are about to change when it ticks over into the 1st of July.

Things that you should be aware of, perhaps your payroll and accounting team need to be aware of, or your accountant or bookkeepers as well. So to run through what some of the key changes are that small businesses should be across, I’m joined this morning by the Australian Small Business and Family Enterprise Ombudsman, Bruce Billson. Good morning to you and great to have you back on the program.

Bruce Billson

Selina, fab to be with you.

Really thoughtful of you in terms of this chat we’re having. I mean, the Limestone Coast has one of the highest number of small businesses outside the greater Adelaide area in terms of what’s happening in South Australia.

So there would be lots of people interested in, frankly, lots of things that are changing as of the 1st of July. And as we come in towards that critical date, it’s really important for business owners to understand these changes. And you know, it goes with that big responsibility of owning and running your own business.

Selina Green

So, let’s start to run through some of them because as you said, there are quite a few changes and some significant ones as well. And one we have talked a little bit about on the program in the last couple of weeks are some changes around the instant asset write-off and that is mainly around the threshold is going to be changing.

Bruce Billson

That’s right and it’s been moving around quite a lot and so we thought it was important just to highlight the fact that the era where we had the write-off of eligible assets up to $150,000, that expires on the 30th of June. And then we move into a more conventional instant asset write-off process where it’s $20,000 per asset.

Now, what’s different about that is, and some of your listeners, tradespeople in particular, you know, they might have had a good year and were in a good financial position to invest in a new Ute or something like that and could write that purchase price off their income and then have the income tax paid on the balance adjusted for that purchase.

Now that process, that asset write-off process now after the 1st of July will be at $20,000 per asset. So the thing that’s important there is that the higher amount available to 30 June, that’s for assets that are installed and that you’ve used prior to that date. So if people are thinking about ducking out and getting a new Ford Ranger because they look pretty cool, somehow they’re going to have to get that done, dusted, delivered and used by by 30 June and that’s where it’s a bit of a challenge.

So one to watch. And it also introduces something that, you know, I’m old enough to remember asset pooling with my businesses, there’s a process for small businesses to depreciate. So that’s where you write-off a part of the value of that asset over its serviceable life.

Asset pooling is the way that you deal with assets over that new reduced write-off amount and then you can take chunks off, 15% in the first year, 30% in the second. Sounds all terribly complicated and that’s why it’s important to know that things are changing and to talk with your accountants and you bookkeepers about how that works out in reality for your business.

Selina Green

And let’s talk about the small business energy incentive. How is that going to work?

Bruce Billson

Well, that’s an interesting one because there’s two parts there. Obviously, there’s scope for that instant asset write-o- benefit where that investment’s under $20,000. But what government’s also done, and this only starts from the 1st of July, is that you can then get a 20% bonus.

In addition to writing off what you’re able to write-off, there’s a further 20% available for investments that are really about improving the efficiency and energy consumption in your business. So that’s like heating and cooling systems. It might be a more efficient fridge. It might be replacing a gas cooktop with an electric induction one. All of those things are being encouraged by this government policy to support electrification and more efficient energy use as we try and meet zero net emission targets, that there’s that tax incentive that gives you that extra little bit of encouragement of a 20% bonus depreciation on those.

Selina Green

And that is for businesses, depending on their annual turnover, really aimed at smaller business?

Bruce Billson

It is. I mean the turnover at the moment for that measure is $50 million. So you’ve got to be a pretty big small business not to be able to to get into that.

And so for most businesses that’s a real encouragement, particularly when you’re seeing changes in energy pricing. I know many of your listeners, both business and households, have probably had their hair curl when they’re seeing some of the electrical price increases and gas price increases. This is an attempt to sort of, you know, reset that energy consumption picture so that people are better placed to have a more efficient arrangement and one that produces less emissions going forward.

Selina Green

Bruce Billson is with me this morning. Bruce is the Australian Small Business and Family Enterprise Ombudsman. He’s running through with us some of the big changes that are coming into effect for small businesses from the 1st of July. One of those is around the super on payments for employees that small businesses make.

Bruce Billson

That’s going from 10.5% to 11% of the employee income. And so that’s part of a trajectory that’s going to see it ultimately go up to 12% as a contribution. But that important tick over from 10.5% to 11% that also starts on the 1st of July. Now this is particularly important. Most employers will probably have some automatic mechanism in their payroll and accounting systems that will take account of that change. But even if it’s not, that’s not an excuse the Tax Office will appreciate. Oh, I just thought it was going to happen. No, there is a positive onus on employers. Again, part of that big responsibility of owning and running a business to make sure that that change takes place.

The law’s pretty stiff when it comes to this sort of thing. There are penalties where people aren’t meeting those superannuation contributions. So it’s really important to know that that change has happened. If you’re using software packages or accounting systems, make sure that adjustment is there so you’re not on the wrong side of that change to the rate of super guarantee contribution

Selina Green

And something else that’s taken pretty seriously and can come with some penalties if employers across it, and that is a change to the minimum wage and the award rates as well.

Bruce Billson

Yeah, they’ve stepped up. People probably were aware of a lot of media coverage at the time about that change. So that’s an award rate increase of around 5.75% and also an uplift in the minimum wage, which is $882.80. Can’t forget the 80 cents a week, Selina. And so there was a lot of debate around that decision at the time it was made by the Fair Work Commission, but now it’s actually coming into effect.

And we’ve spoken before. In my view, the workplace relations system in Australia is spectacularly complicated and you’ve seen even some of the largest businesses, even some government departments, not get it right. And then you see things about underpayment playing out. Well, this is another example where you’ve got your trusted advisers, if you’ve got some sort of platform that does your payroll, just to make sure it’s up to date. Most of those digital service platforms will do that and make that work in a fairly seamless way. But again, just assuming that that change has been made is not going to be a great defence, if if the Fair Work Commission, or the Fair Work Ombudsman in this case, comes knocking on your door wondering why you’re not paying at the right rate.

So keep an eye on that one as well. Lots of moving parts. And I guess my invitation is to just alert small business owners and leaders to these moving parts so they can have a quick eye and make sure that those changes are working for them and they’re all in place.

Selina Green

One other change I wanted to touch on was for any employers who have staff going off on maternity or paternity or parental leave from next year. There was also some changes around the the entitlement under the leave scheme.

Bruce Billson

Yes, it is hopping around a little bit and can be taken in different ways where partnered couples can claim up to 20 weeks between them.

So, you know, the previous entitlement of 18 weeks is being topped up by this partner addition of another two weeks. So now for a single parent, it’s 20 week opportunity for that sort of leave. But if it’s a combined couple raising the micro-human, that is something that can be shared between the parents and that’s something that has been introduced, again, something employers need to be alert to.

And, you know, it’s a great initiative for new families with a newborn. It is another moving part and another moving part that a small business employer has to navigate and balance up and realise that something that may impact on their workforce at a time, as we discussed when I was last in Mount Gambier that it’s really hard to get staff. And you’ll find these parenting support mechanisms, everyone will nod and say that’s a great idea and a great start for that newborn, but it is another challenge that a small business employer has to juggle and navigate. So be alert to that one as well.

Selina Green

Bruce Billson is my guest this morning, the Australian Small Business and Family Enterprise Ombudsman. Bruce, before I let you go, one more I did just want to touch on and that is one that may affect a lot of businesses here or those who utilise skilled migrants as well. There is a change to the temporary skilled migration income threshold.

Bruce Billson

Yes, there is. It’s got a funky name. You know, I’m no rapper but the wokka-wokka name for it is TSMIT. So if someone’s running around saying TSMIT, it’s the Temporary Skilled Migration Income Threshold. Now that that’s been fairly stable for some time, it’s been $53,900 for some time and hadn’t been adjusted. And these are for various employer-sponsored worker skills visa categories. Now that minimum income now is $70,000. So if you’re looking to bring in a skilled migrant and use one of those three streams that employers can utilise, that needs to at least be an income of $70,000.

Now, when I was in town last time, I did check in with a number of employers in the region who were in that space and they thought that of itself wouldn’t be too difficult, particularly if you’re looking for a chef or something like that. I mean, there were a few remarks made about, you know, who could you get for $53,000 just to take on that role. But it’s now $70,000. But again, something that people need to keep an eye on. I’m not expecting that to be a challenge for the local employers on the Limestone Coast, because when I spoke with them about it, they said we’re having to pay higher wages than that just to attract people in the first place. But it is a requirement now in that sponsored migration stream.

Selina Green

The minimum at least to be aware of when you are setting a wage for trying to attract someone in. Bruce, this is, as you say, a lot of moving parts and a lot for people to wrap their heads around and make sure that they’re across. There are resources out there for people to access if they’re not sure and want some extra details because we’ve already sort of scratched the surface. There are other changes.

Bruce Billson

That’s right. And jump on our website. For employers not sure what those moving parts are it’s asbfeo.gov.au – it’ll give you a bit of a summary but also hyperlinks to those areas where specific details and more information may be really useful for the terrific employers in the south east region.

Selina Green

Bruce Billson, thanks so much for your time this morning. We do always appreciate it.

Bruce Billson

Fab to be with you Selina, take care.

Selina Green

Bruce Billson there who is the Australian Small Business and Family Enterprise Ombudsman. If you go to their website (www.asbfeo.gov.au), there’s a lot of information on there and they’ll also link you up with other resources where you can find more info.