Changes for Small Business Operators

Fair Work Australia’s minimum wage panel recently handed down its annual wage decision increasing:

– The federal minimum wage and minimum award wages by 2.9% – bringing the federal minimum wage to $15.96 per hour; and
– Casual loading for non-award covered employees to 23%.

These increases, together with the increases to expense base allowances – which increase annually based on the relevant CPI group – take effect from the first pay period from 1 July 2012.

With the new financial year, employers should review existing wage rates and salary arrangements to ensure that from 1 July 2012 wages being paid to staff are equal to or higher than the relevant rate under the applicable award – or the federal minimum wage.

For employers that pay “all up” hourly rates or remunerate staff on a salaried basis, now is also a good time to review pay rates to ensure that when such rates are broken down employees are not being disadvantaged under the relevant award.

Where wage rates and allowances need to change to take into account such increases, employers should consider whether any written variations need to be made to their employment contracts.

Employers who fail to pass on the necessary increases or are found to be underpaying staff risk prosecution and penalties of up to $33,000 per employee – not to mention the possibility for personal liability for directors involved in the company’s contravention. Now would be an opportune time for management rights operators who employ staff to check your compliance.

Work Health and Safety Act 2011 -The Work Health and Safety Act 2011 provides a framework to protect the health, safety and welfare of all workers at work and all other people in the workplace. This act has:

– Introduced additional obligations of all people involved in a workplace – not limited to employers and workers;
– Introduced additional obligations on existing parties; and
– Created personal consequences for non-compliance.

Every person in a body corporate – including those who simply live there – now have some responsibility under the Work Health and Safety Act 2011. These new laws mean that management rights operators need to understand the risks and ensure you have the appropriate measures in place to manage those risks.

Obsolete stock – All stock should be reviewed during an end of year stocktake and decisions made in relation to the current realisable value of any stock held for resale. Consider the age of the items, likelihood of future sales and their scrap value. Any stock that has no realisable value can be considered to be obsolete and an outright deduction claimed in the current year. Remember to retain and file all relevant documentation.

Be prepared to substantiate your claim – Make sure you keep all receipts to substantiate your deductions and be able to demonstrate why the expense was incurred to derive assessable income.
Fixed assets – Review the useful life of fixed assets and determine if there are any benefits in scrapping or trading in such assets in light of the new capital allowance measures due to come into force from 1 July 2012.

Work from home – Taxpayers that work from home may be able to claim a percentage of home-related expenses. These expenses must be directly related to the earning of taxable income. Many management rights operators are in a position to claim home office expenses that are often overlooked.

Renovations by previous owner – You may be eligible for a deduction for depreciation on the cost of improvements by a previous owner, provided items are identifiable and itemised on a depreciation schedule. Generally this will require the use of a quantity surveyor to make an assessment of the value of the improvements for depreciation purposes.

Review division 7A private loans – A private loan older than six years faces a risk of becoming statute barred (unenforceable). This means the Australian Taxation Office may use its discretion and treat the loan as an unfranked dividend unless remedial action is taken. Should you own a private company that is currently trading or has traded in the past you should review your exposure to division 7a on an annual basis.

Prepayment of private health insurance premiums – Did you know if you prepay your health insurance before 1 July 2012 you can avoid the reduction in the 30% private health insurance rebate?

From 1 July 2012 the 30% health insurance rebate will be means tested. For families earning up to $168,000 and singles earning up to $84,000 the 30% rebate will still apply; however if you fall above these limits, the rebate will start to phase out.

Unchanged Tier1Tier2Tier3
Singles$84,000 or less$84,001 – $97,000$97,001 – $130,000$130,001 or more
Families$168,000 or less$168,001 – $194,000$194,001 – $260,000$260,001 or more
Under age 6530%20%10%0%
Aged 65-6935%25%15%0%
Aged 70 or over40%30%20%0%


Most private health insurance companies are allowing customers to prepay up to one year of private health insurance before 1 July 2012, meaning they can still receive the 30% rebate as part of their fees. This can mean a significant saving on the premium for the 2013 year.

Tony Rossiter

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