Retirement
How to increase members’ balances without hurting small businesses
Retirement
How to increase members’ balances without hurting small businesses
The small business ombudsman has proposed holding the rate of superannuation at 9.5 per cent while changing tax regulations to help members rebuild their balances post the early access to superannuation scheme.
How to increase members’ balances without hurting small businesses
The small business ombudsman has proposed holding the rate of superannuation at 9.5 per cent while changing tax regulations to help members rebuild their balances post the early access to superannuation scheme.
In a letter to Treasurer Josh Frydenberg, the Australian Small Business and Family Enterprise Ombudsman Kate Carnell has explained how changing the tax laws could help boost members’ balances.
Under Ms Carnell’s proposal, there would be a two-year deferral on legislated superannuation guarantee increases while also cutting the 15 per cent tax on compulsory employer superannuation guarantee contributions to 7.5 per cent during that time.
According to Ms Carnell, this would cost the government $6 billion per year in lost tax revenue, but would ultimately support small business while helping Australian workers who have taken advantage of the government’s early access to super scheme rebuild their balances.
“Ultimately, by implementing this proposal, the federal government would be supporting small businesses and all Australians who deserve a dignified retirement,” she said.
Ms Carnell says the combined measures offset each other, to ensure workers end up with a similar superannuation amount as they would have under the scheduled increase.
“We have to get the balance right by ensuring small businesses aren’t hit with rising costs and workers are no worse off,” Ms Carnell says.
“Many small businesses are already struggling to stay afloat as a result of the COVID-induced recession and cannot afford to pay higher costs.
“These increased costs would put small-business owners under even more financial strain, placing jobs and businesses at risk.
“It is equally important to safeguard the long-term financial future of Australians through superannuation,” Ms Carnell explained.
Her comments follow the superannuation guarantee, or the rate of superannuation employers have to pay employees, being scheduled to rise by 0.5 per cent a year for the next five years, eventually reaching 12 per cent in 2025.
Liberal backbenchers have cast a doubt as to whether it is the right time to raise the rate as the economy battles its first recession in almost 30 years.
Productivity Commission chairman Michael Brennan said employers will have to find the money somewhere.
“There’s no free lunch,” he told a Senate committee on Thursday, 10 September.
“It comes from somewhere. It’s an increase in the net cost to the employer.
“Something’s got to give, so whether that’s a slowing of what would otherwise be pay rises or employing fewer people. It shows up somewhere.”
The former prime minister and the man who introduced compulsory superannuation into Australia has accused the “bitchy” Liberal Party of using COVID-19 to kill superannuation.
He said politicians get 15.5 per cent super, while the “bitchy Liberals” want to knock off currently legislated 2.5 per cent rise, which will impact Australians for the rest of their lives.
“I’ve been here. All this was said to me in 1992. What did we see? We saw real wages rise for 20 years. Now the average accumulation for every Australian is $230,000, it will be half a million in eight years from now. All of this was said before. It’s all wrong.”
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