Inflation stays at 3.4% | ATO tax tips

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Inflation stays at 3.4% | ATO tax tips | Job market slowing

oxcel Finance
May 26, 2024

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Price growth remains stubbornly high, with the Australian Bureau of Statistics reporting an inflation rate of 3.4% in January, the same as the month before.

The Reserve Bank of Australia (RBA) has been trying to reduce inflation to its target range of 2-3%, by raising interest rates to slow demand and reduce spending. Inflation is forecast to fall to 3.2% by the end of this year and 2.8% by the end of next year.

Speaking at the ABE Annual Forecasting Conference last month, the RBA's head of economic analysis, Marion Kohler, said there had been a significant divergence in the path of core goods and services price inflation.

“Like in many other advanced economies, most of the decline in inflation so far in Australia has been from lower goods price inflation,” she said.

"But services price inflation remains high and broadly based. This strength has been because of continued pressure from the level of demand exceeding supply alongside strong growth in domestic costs.”

Ms Kohler said a decline in services price inflation was necessary for the RBA to achieve its inflation target, and forecast that this would occur “gradually”.

The Australian Taxation Office (ATO) has reminded businesses of the importance of meeting their employer obligations, to avoid penalties and interest.

ATO tips included:

PAYG withholding. Pay close attention to tax tables, as different workers may have different withholding rates.
Single touch payroll (STP). Report payroll information through STP-enabled software each time you pay your employees. Make an end-of-year finalisation declaration by 14 July, so staff can complete their tax return.
Superannuation. The super guarantee increased from 10.5% to 11.0% on 1 July 2023 and will increase to 11.5% on 1 July 2024. If you have a new employee and they don't choose a super fund, request their stapled fund details from the ATO.
Fringe benefits tax (FBT). If you provide non-cash benefits to your employees, consider whether FBT applies. Ensure you use approved valuation methods when determining the taxable value of fringe benefits provided.
Due dates. The ATO can support your business if unexpected events make it hard to meet your employer obligations. If you're having trouble paying in full or on time, contact the ATO ahead of time to discuss your options, including a payment plan.

Labour market conditions are easing but remain tight, particularly for higher-skilled occupations, according to the December 2023 quarter labour update from Jobs & Skills Australia (JSA).

JSA reported a slowdown in jobs growth, from 0.5% in the September quarter to 0.4% in the December quarter. At the same time, there's been a shift from full-time employment (which fell 0.4% in the December quarter) to part-time employment (which rose 2.2%).

The slowing economy was reflected in a 0.4% quarter-on-quarter reduction in the number of hours worked by Australia's labour force. In year-on-year terms, the number of hours worked actually increased 1.2% – but this was less than the 2.8% increase in jobs. In other words, the average worker is now doing fewer hours.

JSA suggested “employers may be hoarding workers in what is still a reasonably tight labour market and are instead preferring to reduce employee hours in the first instance, rather than letting staff go in response to the gradual softening in conditions”.

That may explain why JSA’s survey of employers found employers are still experiencing challenges finding suitably skilled workers to fill vacant positions.

“While recruitment difficulty has fallen across both higher- and lower-skilled occupations over the year, employers continued to encounter greater difficulty recruiting for higher-skilled occupations.”

The higher your company’s credit score, the easier you’ll find it to qualify for finance and attract lower interest rates.

To improve your credit score, commercial credit reporting bureau CreditorWatch recommends:

Learn how the system works. Credit scores are calculated based on a company's financial stability, payment history and reputation, according to CreditorWatch.
Order a copy of your credit report. That will give you an official insight into how you're performing.
Review all your main financial documents. Check your balance sheet, income statement and cash flow statement, to understand the financial health of your business.
Assess your debt levels. This should include your absolute level of debt, debt-to-equity ratio, share of 'good' versus 'bad' debt and debt-servicing capacity.
Evaluate your payment history. “Meeting payment deadlines consistently showcases a high level of financial responsibility and reliability. On the flip side, if you’re often late with payments or don’t pay at all, it can raise concerns among lenders and negatively affect your overall creditworthiness,” CreditorWatch said.