Tax time is in the rearview mirror, and hopefully you now have some time to think about the changes impacting small businesses in the 2026/27 financial year. From wage increases to new parental leave considerations, instant tax write-offs to PAYG adjustments, now is the perfect time to review your policies and procedures and ensure you’re compliant with these new legislative changes.
Minimum Wage Increases
From 1 July 2026 both the National Minimum Wage and minimum award wages increased. The National Minimum Wage rose by almost 6%, effecting all employees not covered by an award or enterprise agreement. This is the largest increase since 2023, with the Federal Government hoping the increase provides relief from the cost of living crisis.
From 1 July 2026, the National Minimum Wage is:
- $1,004.90 per week, or
- $26.44 per hour
Award wages saw an increase of 4.75%, provided that:
- the lowest rate in any award that applies to ongoing employment must be at least the National Minimum Wage of $1,004.90 per week or $26.44 per hour
- any entry-level rate that applies to the first 6 months (or less) of employment must be at least $978.10 per week or $25.74 per hour
Wage increases for trainees under the National Training Wage also came into effect from 1 July under the National Training Wage Schedule, giving trainees the same 4.75% increase in minimum award wages.
All businesses should have updated their payroll for these changes prior to 1 July. Now is the time to review all documents and procedures to ensure that relevant award wages are applied for any new hires or trainees that are onboarded for the remainder of the 2026/27 financial year.
Income Thresholds and the Compensation Cap
While most employees will be covered by an award wage or the National Minimum Wage, if an employee exceeds the high income threshold, the relevant award will stop applying to them. For the 2026/27 financial year the high income threshold has increased from $183,100 per year to $190,100 per year. Similarly, the contractor high income threshold is now $190,100 per year.
In both cases, employees and contractors who reach this threshold are not automatically protected by the relevant award or Fair Work remedies, particularly as they pertain to unfair termination. It’s crucial for both businesses and individuals to review their employment or engagement contracts to ensure both parties are aware of their rights and obligations around termination and what happens if an employee or contractor reaches the high income threshold.
Changes to Parental Leave
In new changes to parental leave, paid parental leave increased from 120 days to 130 days for children born or adopted on or after 1 July 2026. Paid parental leave continues to be paid at the National Minimum Wage, with the ATO rolling out their 12% super contribution on parental leave payments for children born or adopted on or after 1 July 2025.
The 2026/27 Federal Budget also increased the amount of flexible parental leave new parents can take, bumping up to 130 days. Flexible parental leave allows parents to take unpaid leave in any combination of single or multiple days up until their child’s second birthday or the second anniversary of their adopted child’s placement.
Businesses should ensure all employment contracts and leave policies have been updated with the new 130 days of leave for both paid parental leave and flexible parental leave, as well as any internal paid parental leave benefits offered by your business.
Instant Asset Write-off Becomes Permanent
When tax time rolls around next year, business owners will be happy to know that the $20,000 instant asset write-off is now permanent for small businesses with aggregated turnover under $10 million. From computers and office equipment to tools, machinery, and even vehicles, eligible assets can be immediately deducted in the year they’re first used or installed ready for use. Even better, the $20,000 limit under the measure applies on a per asset basis, so small businesses can instantly write off multiple assets. Assets valued at $20,000 or more can continue to be placed into the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year after that.
Ensure that you keep receipts and records of all business purchases in the 2026/27 financial year, and seek advice from an accountant regarding what assets may be eligible to be written off.
PAYG & Superannuation Compliance
The Federal Budget introduced a number of changes to PAYG and superannuation contributions, including the start of Payday Super from 1 July 2026. While PAYG instalments are still due quarterly, from 1 July 2027 businesses will be able to opt in to monthly PAYG instalment reporting and payment, providing businesses with better cash flow management and smoother budgeting.
The ATO has also expanded its Dynamic PAYG instalments pilot for 2026/27. Selected businesses will be able to use an ATO-approved calculation method embedded in accounting software like Xero to automatically adjust PAYG instalment amounts based on current business performance, rather than historical data. From 1 July 2027 all businesses will be able to opt in to the new calculation methods, with the ATO removing interest charges for any incorrect instalment variations made using ATO-approved calculators.
Looking for help to navigate these changes?
We understand that navigating legislative changes can be difficult for small business owners. If you want to make sure you’re compliant, you might like to chat to our HR or Bookkeeping team. Contact us today for a hassle-free consultation.