New laws for small businesses kick in on July 1: Here are all the changes you need to know

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It’s official. The end of financial year has arrived and while small businesses are busy getting their tax affairs in order, they should also take note of the legal changes set to occur at the start of the new fiscal year.

From a cut to the small and medium business tax rate and increase in the national minimum wage, there are a range of legislative updates affecting small businesses that kick in today, on July 1.

Here’s a quick guide to key legal changes your business needs to know about in 2021-2022.

Increase to minimum wage

The national minimum wage will increase by 2.5% from today, following the Fair Work Commission’s annual review last month. The increase brings the national minimum wage to $772.60 per week or $20.33 an hour.

The change will affect the national minimum wage and modern awards. However, changes to award wages in industries affected by COVID-19 have been delayed.

The wage increase under the Retail Award will begin from September 1, while changes to 21 other awards, such as the Hospitality, Fitness and Tourism awards, have been delayed until November 1, 2021. 

Increase to superannuation contribution

The superannuation guarantee (SG) rate will increase by 0.5%. This means that the minimum super contribution that employers are required to pay to their employees’ super funds is now 10%.

The change will affect cash flow for businesses differently. For example, it will increase superannuation expenses where employees are paid super on top of their hourly rate or salary, increase workcover premiums and increase payroll tax liability.

Another change to superannuation included in the recent Your Future, Your Super Bill is an increase in the number of members allowed in self-managed super funds (SMSFs). From today, the maximum number of members allowed in a SMSF or small APRA fund is six instead of four.

Drop in the SME tax rate

The corporate tax rate for small and medium companies — that is, businesses with turnover under $50 million will drop to 25% in the 2021-22 financial year.

The reduction has been in the works for several years, with legislation passing federal parliament in 2018 that gradually reduced the tax rate to 25%.

Additionally, the turnover threshold for access to a range of small business tax concessions is rising from $10 million to $50 million.

COVID-19 tax relief to continue 

A range of temporary tax relief measures announced in response to COVID-19 will continue into the next financial year.

The temporary loss carry-back regime will allow companies with annual turnover of up to $5 billion to carry-back tax losses from the 2021-22 and 2022-23 income years to offset previously taxed profits as far back as the 2018-19 income year.

Temporary full expensing measures will allow businesses with annual turnover or total income of up to $5 billion to instantly write off the cost of eligible depreciating assets purchased from October 6, 2020 and ready for use by June 30, 2023.

Changes to industry taxes

As part of the May 11 budget, the federal government announced a tax incentive for local videogame development.

From July 1, the Digital Games Tax Offset will offer a 30% refundable tax offset to local game manufacturers that spend a minimum of $500,000 on qualifying games expenditure. The expenditure is capped at $20 million per annum.

Additionally, this financial year, small brewers and distillers will receive automatic tax relief after the federal government amended excise legislation.

Starting July 1, the excise refund cap for small brewers and distillers will be boosted from $100,000 to $350,000 per year. Eligible brewers and distillers will also receive a 100% refund of any excise duty they pay, rather than the 60% refund that previously existed.

Changes to unfair dismissal

The rules around whether an employee is entitled to bring a claim for unfair dismissal will change from July 1.

If an employee is not covered by a modern award, or if an enterprise agreement does not apply to them, they must earn less than the high-income threshold to be protected from unfair dismissal under the Fair Work Act.

From today, the high-income threshold will be $158,500 per annum excluding superannuation, instead of the previous $153,600. The maximum compensation in unfair dismissal claims is now $79,000.

Franchising reforms

A suite of changes to the Franchising Code of Conduct kicks in from today that aims to better balance the rights of franchisees and franchisors in the $154 billion industry.

Franchisees in a dispute with their franchisor can receive assistance from the Australian Small Business and Family Enterprise Ombudsman, who now has the power to appoint an independent arbitrator if both parties agree.

The cooling off period that allows franchisees to exit new agreements or leases without incurring a cost has been increased to two weeks.

Franchisors now face more reporting requirements when providing documentation to franchisees about the costs of running a franchise, and there are more restrictions on franchisors that demand significant capital expenditure or payment for legal costs.

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