The new financial year will bring a fresh round of cost increases for Australian businesses. From 1 July, the national minimum wage will rise by 3.5%, and the compulsory superannuation guarantee will increase to 11.5%.
While the changes will deliver a welcome boost to the take-home pay of around 20% of Australian employees, many business owners are facing the reality of higher wage bills, squeezing margins and placing renewed pressure on cash flow.
“Small businesses are facing a cost crisis across energy, rent, insurance and input costs,” said Luke Achterstraat, CEO of Council of Small Business Organisations Australia (COSBOA).
“[The] decision of a 3.5% increase – which is above the current rate of inflation – will have ramifications for our small business engine room, many of whom are struggling to make a profit on already razor thin margins.”
Wage and super increases will drive up costs for award-reliant industries
The food and beverage and retail sectors, which employ large workforces on or near the minimum wage and typically operate on narrow margins, are expected to feel the sharpest pressure from the minimum wage increase, making them more vulnerable to any disruptions in cash flow.
A single delayed customer payment or an unexpected expense may be enough to trigger a short-term cash shortfall – particularly for businesses with seasonal income patterns or irregular payment cycles. A recent survey by Xero found 87% of Australian small businesses were already facing cash flow challenges.
In some cases, the squeeze on profitability may force business owners to reconsider their expansion plans, delay investments, or pass costs on to consumers through higher prices.
Consumer spending may increase, but short-term cash flow challenges remain
While wage increases will create immediate financial pressure for many business owners, it’s not all bad news.
Rising minimum wages often support household consumption and broader economic stability. In its recent Annual Wage Review decision, the Fair Work Commission (FWC) noted that increases to the modern award minimum wage are likely to have a positive national economic effect by strengthening consumer spending and sentiment.
When wages rise, lower-paid workers typically have more disposable income – and much of that additional income flows back into the very businesses that employ them. The FWC highlighted that sectors such as retail and food services are “well-placed to benefit” from any uplift in consumer activity generated by the higher minimum wage.
However, while this broader stimulus may help offset some pressures in the long run, it does little to ease short-term cash flow challenges.
Proactive cash flow management strategies for small businesses
The minimum wage and superannuation increases represent a permanent shift in employment costs for many Australian businesses. Understanding the full impact on cash flow – and addressing it early – will be key to maintaining financial stability as operating costs rise. Business owners should update their cash flow forecasts to reflect the full cost impact and identify any potential funding gaps.
One of the most immediate actions businesses can take is to revisit payment terms across their supply chains. Negotiating longer payment windows with suppliers can offer breathing room, allowing more time for revenue to flow in before payments are due.
Another option is Debtor Finance (also known as Invoice Finance), which unlocks cash tied up in outstanding invoices to smooth out working capital fluctuations and ensure businesses can meet rising wage and superannuation obligations without disrupting daily operations or long-term plans.
For growth-focused businesses, Trade Finance can offer valuable flexibility when cash flow is tight, allowing businesses to invest in stock purchases, equipment upgrades or marketing activity without draining their cash reserves.
A finance partner to help you navigate rising employment costs
With wages and superannuation on the rise, many businesses will feel a strain on cash flow. But with the right cash flow management strategies and working capital finance solutions, SMEs can manage higher costs while staying on track for growth.
Talk to Octet’s working capital experts today to explore how we can support your business through these changes, and beyond.
Disclaimer: These comments are only our views and should not be construed as advice. You should act using your own information and judgment. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgment as at the date of publication and are subject to change without notice.
