You wrote:
"My situation is not that the boss is pocketing the extra profits, but that he is charging the students only $20 p/hr for my services. Effectively undercutting the competition :roll:"
If your boss is charging $20.00 an hour for your time, and you are getting all of that twenty, does that mean your boss is putting up the 8% of gross for super and 3% for compo him/herself? (Hmm. Sounds a bit odd, where is the money to cover overheads etc?) Make sure you are covered by compo, many exploited instructors aren't, otherwise god help you if you have an accident in the workplace.
Once you have accepted those conditions, you can hardly go to your boss and say you suddenly want more. It's too late for that. $35.00 an hour for a grade two is a bit more realistic, but still on the low side.
Do you get any perks like free renewals etc?
I say again, it is possible to pay the award and run a viable GA business, provided the boss works as hard if not harder than everyone else and is prepared to go without the brand new BMW in the lean times.