BusinessFinance

Have you forecasted a 3.4% wage increase into your cash flow plans?

With Fair Work Australia’s announcement that the country’s minimum wage workers will receive a pay rise of $19.40 a week from 1 July 2011, all business owners now need to ensure payroll obligations are reviewed and revised for their first pay cycle from this time.

You see while the wage rise effectively lifts the federal weekly minimum wage to $589.30 or $15.51 an hour from the start of the upcoming financial year, it also increases all Modern Award base rates by 3.4%. So, if you employ workers under Modern Awards conditions or in accordance with the national minimum wage, you need to ensure the revised pay rates are implemented from 1 July 2011.

For many small businesses in retail, hospitality, tourism, and manufacturing that are still dealing with a sluggish market, this increase is going to be very hard to bear and will add substantially to business costs.

Furthermore, you need to ensure that you reflect these increases in your employee super contributions. As I am sure you know, the director penalty regime is being extended to include the superannuation guarantee from the start of the new financial year. From this time, directors will be held personally liable for their companies’ failure to pay employee superannuation.

What this means is that in the same way the ATO issues a Penalty Notice for unpaid PAYG tax and a director becomes personally liable for the penalty at or before the due date for payment, the same regime will affect directors of companies that fail to pay the superannuation guarantee charge (SGC).

Of course, the rise in the minimum wage should have come as a surprise to no one. Adopting sound business planning and management accounting principles would help you to have forecasted increased wages and super contribution payments in your forward plans.

Good cash flow management starts with sound record keeping and understanding the general flow of money through your business as well as planning for the future, and this includes increases in wages and funding superannuation payments.

Ashleigh Swayn is CEO of Countplus MBT, a chartered accountancy practice offering accounting, financial planning, and expertise.

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