Small businesses draw short straw from superannuation guarantee increase: ACCI

24 November 2011

| By Andrew Tsanadis |

Small to medium enterprises (SMEs) will be required to pay at least half the cost of the estimated $20 billion compulsory superannuation guarantee levy (SGL) under the Government's Superannuation Guarantee (Administration) Amendment Bill 2011.

That's according to the Australian Chamber of Commerce and Industry's (ACCI's) submission to the House of Representatives Economics Committee, which suggests that the proposed rise in the superannuation guarantee has no "credible or workable funding base", and that the levy cannot be "reliably or realistically funded by a wage-superannuation trade off."

In its current form, the Bill amends the existing age limit for employer payments from 70 to 75 years, but the body stated that the Government's second reading of the Bill indicates the age limit for superannuation contributions will be removed altogether.

"This alone, will mean employers [will be] funding superannuation for an additional 18,000 Australians aged 75 years and over," the submission read.

Increasing the contribution rate is "poor policy", considering the recent underperformance of local and international markets, ACCI added.

While the reduction of the company tax rate from 30 per cent to 29 per cent was welcome by the industry body, ACCI stated that the concession to SMEs is "grossly outweighed" by the cost of the super guarantee increase.

The Association of Superannuation Funds of Australia (ASFA) stated that given the SGL is to be phased in over eight years, employers would not face any sharp increase in labour costs.

"We've always considered that the increase in the superannuation guarantee will stand on its own merit. It becomes self-funding after 20 years because of the reduction in pension, and adds about 0.33 per cent to the economy," said ASFA chief executive officer Pauline Vamos.

"The work on whether it is affordable to employers has already been done, and when you look at history - particularly over the slow period that it's being introduced - any increase is absorbed by wage negotiation; it does not decrease productivity."

ACCI has proposed the debate on the Bill be deferred until 2012.