It’s the start of the new financial year, and entrepreneurs are breathing a sigh of relief that the June 30 rush is over.
But businesses can’t afford to slack off. Keeping up with new modern awards, paying out an increase in the minimum wage and ensuring contracts aren’t favouring one party over another – these are just a few of the tasks that await businesses in the first day of the new financial year.
There isn’t any more time for lobbying or preparation. These changes come in today, and are required by law. SMEs need to make sure they are up-to-date with the changes and don’t ignore their legal requirements.
While some of these changes have been welcomed and are hoped to promote safer business, such as the Franchising Code reform, others such as the minimum wage increase and modern awards will certainly put pressure on SMEs.
Here are the five big changes coming in today, and more information for SMEs on how to deal with all of them.
Minimum wage increase
Early last month, Fair Work Australia announced it had ordered an increase in the minimum wage to $569.90, representing a rise of $26 per week. Businesses were hoping for no more than $12 per week, but the government body said a higher rise was needed due to last year’s freeze.
Business groups aren’t happy. Australian Chamber of Commerce and Industry chief executive Peter Anderson said the decision was “so swift and harsh that many businesses will be left reeling”, and said the ruling was a “setback”.
ACCI also said the decision will add $2.5 billion to wage bills for small businesses, and said the rise is more like $31.20 per week due to the addition of payroll tax, super and other compensation.
Additionally, Australian Retailers Association executive director Russell Zimmerman said small businesses will be put under extraordinary pressure. “Weekend retailers will be seriously affected. We think that it may cause some members to review or reduce staff hours or they may even have to put staff off,” he said.
Businesses must be aware of today’s minimum wage rise, and make sure employees are being paid the legal requirement. But SMEs also need to consider whether they can handle the increase with their current staff levels.
Modern Awards
Despite the intention of the Government to create a new, simplified awards system, the modern awards are complex and each business will need to do its own research to determine what is required of them.
July 1 is the start date for the “transition” to pay arrangements under the new Modern Awards system. The Fair Work Ombudsman has provided Guidance Notes for employers how this transition works – it essentially means businesses can adjust to new requirements over five years, rather than changing everything straight away.
The transition period allows for a 20% shift from old award rates to the rates provided under Modern Awards, but there are a number of other details businesses need to keep in mind.
Peter Vitale, principal at CCI Lawyers, describes the different arrangements businesses need to understand when shifting to modern awards.
Consumer Credit
The consumer credit laws, which contain provisions for cracking down on unfair contracts, are a change small businesses definitely need to accommodate. The reform, which the Government has called the biggest change to consumer law in 35 years, ensures larger parties in a contract aren’t given an unfair advantage.
The new laws will crack down on a number of terms including unfair exit fees, penalty fees, and especially clauses that allow one party to change or cancel a contract. These terms are usually found in “standard form” contracts in businesses from gyms and telcos to financial institutions.
Additionally, the laws come as the corporate regulator now has the power to clamp down on financial institutions introducing unfair exit fees.
David Jacobsen, commercial and corporate lawyer and Langes partner, told SmartCompany earlier this year that businesses dealing with consumers directly need to review all of their contracts extremely closely. Make sure all of your contracts aren’t putting you in an unfair advantage, or have terms or conditions that could be deemed unfair.
“There may not be substantial amendments required, but the fact is that reviews will be needed and this is the start of the program, because changes around product safety, guarantees and warranties and conditions are next.”
Additionally, SmartCompany blogger and legal expert Piquet Kruzas wrote last week that businesses must ensure they aren’t giving themselves an unfair advantage.
“In deciding whether a clause is unfair, the court must take into account the contract as a whole and how “transparent” the clause is.”
“In other words, does the contract provide some additional benefit in exchange for the unfair clause? Is the clause easily understood? Was it made clear to the consumer up front? These things won’t necessarily make a seriously unfair clause fair, but it might help with borderline issues.”
Kruzas also details a number of changes SMEs need to keep in mind, including requirements for one-sided variation clauses, limitation of liability and penalty clauses.
The credit laws will also introduce regulations for using household items as security for cash loans. Credit card companies will also be prohibited from sending offers to increase limits to those people who would find it difficult to manage that limit.
Franchising Code
Australia is one of the most heavily franchised countries in the world, so the new Franchising Code is undoubtedly going to hit a significant amount of businesses.
The biggest change included in the code is that a franchisor will now have to give six months notice to a franchisee when a decision has been made to renew, or not renew, the franchise agreement.
Other changes include the provision that franchisors will need to disclose all payments a franchisee may be required to make to third parties, while franchisors must also tell franchisees whether they’ll need to incur any unforseen capital expenditure that was not disclosed in the initial agreement.
Additionally, franchisors now need to disclose the circumstances in which the franchise has varied an agreement in the last three years, and the circumstances in which an agreement might be changed in the future.
Franchise Council of Australia executive director Steve Wright told SmartCompany he is pleased with the changes, and other business representatives say the reform is a good start.
Franchisors need to familiarise themselves with the new code, and ensure they are providing all the necessary information in their contracts.
Income tax cuts
The Government’s third round of tax cuts, and probably the last for a long while, apply from today.
The 30% tax threshold will rise from $35,000 to $37,000. Additionally, the 38% marginal tax rate that kicks in at $80,001 will be lowered to 37%, while the tax-free threshold will also be effectively lifted to $16,000 due to an increase in the low-income tax offset.
For a worker earning $50,000-$60,000, the tax cut will amount to just over $8.60. Those entrepreneurs on $100,000 will earn about $9.50.
It might not seem like much, but as SmartCompany editor James Thomas said yesterday, there are a number of different things entrepreneurs can do with a little extra cash – why not invest more in super, or upgrade your mobile phone?
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
