The financial burden will fall on small business owners when the first of seven annual increases to the Superannuation Guarantee (SG) levy comes into force in 1 July, 2013.
Rob McGuinness, Partner in Business Advisory and Consultancy Services at Nexia Australia, says the increase in SG levy will also raise the cost of running a small business.
He predicts the increase will go beyond the additional 0.25 percent superannuation contributions, and will cause significant financial distress to small businesses. The implications are worsened by the government’s refusal to reduce the company tax rate to 29 percent.
“Anything that has a connection with employment costs – superannuation on top of wages – has a follow through effect in relation to workers compensation premiums because that factors into your total wage and superannuation cost,” McGuinness said.
The government’s intention was to lift the current rate of 9 percent, as it does not provide adequate superannuation benefits on retirement for most Australian employees.
“Even though the proposal is to go to 12 percent, arguably that’s probably not enough. No-one would disagree with the concept that all Australians need to save more for their retirement. Having said that, the issue is whether the burden should fall on employers. That’s the big question mark,” McGuinness said.
“Perhaps the government needs to consider whether there should be incentives given to employees to fund additional contributions,” he added.
McGuinness feels the financial outlook for SMBs is bleak in the run up to the 2013 Federal election as neither political party is prioritising small business policy despite the 2 million SMB population.
“Employers are fighting an uphill battle with government to provide [a flexible workplace] because of penalty and award rates, among other disincentives,” McGuinness said.
Whilst inflation is broadly under control, most people who’ve looked at their supermarket bills every week agree the cost of living in Australia has increased over the past 12 months.
“Many people are going to be seeking a salary increase, but aren’t necessarily going to get it if employers can’t afford to fund the extra guarantee charge on top of the wages they’re already paying,” McGuinness said.
McGuinness’ top tips on how to accomodate the SG levy increase is to hire staff such as casual workers who earn less than $450 per month and under 18s who work less than 30 hours a week, as they are excluded from SG costs.
