Small businesses beware: A guideline to the super changes coming soon

Speculation about the Gillard government’s upcoming changes to superannuation taxation has finally come to an end, with the announcement last Friday that super accounts in the pension phase which earn $100,000 or more will be taxed by at least 15%.

But before this change comes into effect, from July 1 there are a number of amendments already legislated which will affect the way small businesses deal with compulsory superannuation and over the next few years there will be even more changes to super obligations which impact the way small businesses operate.

The changes will see employers contributing more money to their employees’ superannuation savings and changes to superannuation data and eCommerce. As always, it’s important for businesses to comply with the new regulations, or else face possible legal action.

SmartCompany had a chat with some industry experts and compiled a guideline to the superannuation changes to ensure no small business is met with any nasty surprises come July 1.

July 1 changes

As of July 1, employers will be made to contribute 9.25% to superannuation for each of their eligible employees, up from the current 9%. This is the first increase since the Gillard government announced in last year’s budget the incremental superannuation increase from 9 to 12%, to be completed by 2019.

Also on July 1, a change will come into effect which requires elderly people aged 70 and above to be paid their super entitlements, as the existing upper age limit for employee super guarantee eligibility will be removed.

Australian Taxation Office deputy superannuation commissioner Alison Lendon said these administrative changes should be easy for small businesses to take into account.

“Employers will need to ensure their payroll and accounting systems are able to cater for the gradual increase in the super guarantee rate and removal of the upper age limit.”

“Many software and payroll providers have already made system changes to ensure employers will be ready for the 1 July 2013 SG changes,” Lendon said in a statement.

Partner in business advisory and consultancy services at Nexia Australia, Rob McGuinness, told SmartCompany the changes would have little administrative effect on small businesses, but he says the 0.25% increase will be painful for small business.

“These are additional costs at a time when most small businesses are already struggling. For many, the only way they can minimise the cost is to package it as part of the total cost of employment, so many employees won’t see the money straight away.

“It makes small business think twice about employing more people and it will have a flow on effect to other expenses such as workers’ compensation insurance,” he says.

Institute of Public Accountants senior policy advisor Tony Greco told SmartCompany Australia has a patchwork economy where big companies will be unaffected by the rise in super guarantees, but small businesses will struggle.

“A lot of the smaller end businesses are finding it difficult, and having to increase their costs is like a hole in the head at the moment.

“When superannuation guarantee payments start to amp up, it has to come out of the person’s wage increase or it’s going to be at the cost of an extra employee for the business,” he says.

Greco says the best way for small businesses to manage the increase in compulsory super payments is to plan carefully.

“It takes a lot of planning, a lot of businesses are cutting back on their margins, but if they cut them too fine, they will find it even more difficult to make ends meet. It’s just not that easy for them to add on costs and their ability to pass on costs to consumers is often limited,” he says.

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