The commencement of the new financial year will bring with it important changes to minimum wages, national unfair dismissal regulations and various tax thresholds and rates.

In this Alert, our employment law and tax teams have summarised the significant changes about which employers need to be aware.  Depending on your individual circumstances, immediate action may be required from 1 July 2015 to ensure ongoing regulatory compliance.

Increases to minimum wage rates for national system employers (all states and territories, except for Western Australia (WA))

In accordance with the 2015 annual wage review decision of the Fair Work Commission, the following changes take effect to minimum wages from the first full pay period on, or after, 1 July 2015:

  • All modern award rates of pay will increase by 2.5 percent, with flow-through proportionate increases to hourly minimum wages and annual salaries;
  • The national minimum wage for adults working full time (38 hours per week) will increase from $640.90 to $656.90 (an increase of $16.00 per week);
  • The national minimum hourly rate for permanent national system employees will increase from $16.87 to $17.29 per hour (an increase of 42 cents per hour); and
  • The casual loading for award/agreement free employees remains set at 25 per cent, consistent with the standard casual loading in modern awards.

The above changes apply to all workers in the national system including junior employees; employees to whom training arrangements apply; employees with a disability, and; to piece rates, through the operation of the methods applying to the calculation of those wages.The decision is reported to “directly affect over 1.86 million employees in Australia who are reliant upon minimum rates of pay”.

The above new rates provide for a lower increase than last year’s increase (see our previous summary).  The Fair Work Commission has stated that the lower inflation and aggregate wages growth favoured the more moderate increase.

Now is an ideal time for all employers to conduct an annual review of their remuneration arrangements with their employees to ensure ongoing compliance with minimum wage rates. 

Changes to minimum wage rates for WA system employers

For those employers in WA who are outside the national system, effective from 1 July 2015:

  • the minimum wage will increase from $665.90 to $679.90 per week (i.e. the WA minimum wage is $23.00 per week higher than the national minimum wage); and
  • all WA State award rates have increased by 2.1%.

In the WA private sector this change applies to the employees of employers who are not incorporated, such as sole traders and partnerships of individuals.

Changes to the high income threshold and federal unfair dismissal jurisdiction

The high income threshold for the purposes of the Fair Work Act is currently $133,000.  The threshold is indexed annually from 1 July. 

The Fair Work Commission has not yet announced what the new high income threshold will be from 1 July 2015.  Once this information comes to hand we will provide you with an update on what the new threshold will be and how this may affect you and your employees.

Key tax rate and threshold changes

The key tax rate and threshold changes are summarised as follows:

Employment termination payments (ETP)

ETP cap:

  • The ETP cap for life benefit and death benefit termination payments will increase to $195,000 (up from $185,000 in the 2014/2015 income year); and
  • The amount up to the ETP cap is taxed at a concessional rate and the amount in excess of the ETP cap is taxed at the highest marginal rate.

Genuine redundancy programs

Tax-free amount:

  • The new base limit is $9,780 and the amount for each completed year of service is $4,891; and
  • This is an increase from the 2014/2015 base amount of $9,514 and $4,758 for each completed year of service. 

Superannuation

Superannuation guarantee contributions / maximum contribution base:

  • The superannuation guarantee charge percentage will remain at 9.5 percent; and
  • The maximum contribution base is now $50,810 per quarter.  An employer is not required to provide superannuation support for its employees for the part of earnings above this limit.  Although, an employer may have a contractual obligation to make superannuation guarantee contributions for the total amount of an employee’s ordinary time earnings.