The likely impact of the increase in superannuation guarantee contributions to 12% on small business is unclear, with the Institute of Public Accountants warning SMEs will bear the brunt of the reforms and calling for the Tax Office to distribute super instead, but a super body saying the effect on labour costs and prices will be minimal.
The Institute of Public Accountants chief Andrew Conway says although the increase will help individuals support themselves in retirement, the likely effect on SMEs in administering the policy has not been properly considered.
“The cost of administering superannuation is a major burden for small business,” Conway says.
He says the lift will mean small business will need to “divert precious time to administering something they don’t understand, or divert needed cashflow to pay a professional to administer it for them.”
“With little direct benefit to small business, they are merely implementing government policies.”
The Council of Small Business of Australia has long complained about the time required to process super payments, and regular tinkering of the system.
But the Association of Superannuation Funds of Australia says the increase in labour costs in 2013-14 is “likely to be minimal” and will stay small as the superannuation guarantee level is increased to 12% through to 2020.
ASFA also says the required increase in the price of goods and services produced by small business in order to offset the increase “would be relatively small”.
“The amount of increased SG contributions in dollar terms paid by small businesses is likely to be around $300 million in 2013-14 and a further $300 million or so in 2014-15,” ASFA says.
“Other Government proposed measures will deliver tax savings to small businesses which exceed those amounts,” nominating the reduction in the company tax rate to 29% and the instant tax write-off.
Michael Davison, senior policy adviser – superannuation at CPA Australia, says a lot of the fears about the potential cost to SMEs are unfounded.
“From an administrative point of view, because you’re already paying super it should be part of your pay roll,” Davison says.
Davison adds the amounts are small – a quarter of a percentage increase for the first two years – and likely to be worn by employees.
The policy to lift rates progressively to 12% now has bipartisan support, with the Coalition walking away from a commitment to wind back the increase.
The change of heart leaves the Coalition with a $3.7 billion funding shortfall across forward estimates, given it opposes the mining tax, which Labor will use to help fund the shortage between taxes on income and taxes on super.
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