More than 95% of SMEs say an increase in the level of compulsory super contributions will raise business costs, according to a new survey.
Cameron Research Group surveyed 405 Australian companies employing between 20 and 500 staff, highlighting employers’ concerns about their super guarantee obligations.
The report reveals nearly 70% of firms contributed to 11 or more super funds on behalf of employees in 2011 – up from 22% in 2005.
According to the report, more than 55% of firms expect the increase in the super guarantee – from 9% to 12% – will come in addition to wage rises. Another 32% believe higher compulsory contributions will form only part of a wage rise.
“This is all coming at a time when companies can least afford it. This is the worst possible time for them,” Cameron Research managing director Ross Cameron says.
According to Cameron, smaller firms are more concerned than medium-sized companies because they are least able to absorb the costs.
“Small businesses should look at whether their fund has a clearing house as this will cut costs. Most businesses are not aware their funds actually have one,” Cameron says.
The survey reveals only 36% of employers use a clearing house to ease the administrative burden, while more than half are not even aware of clearing house services.
“Also, a small number of firms still write cheques for their default fund, which can be done electronically. Most funds accept payments electronically but some small businesses think that’s not the case,” Cameron says.
Meanwhile, more than 60% of the survey’s respondents say they have never heard of the Gillard government’s plans to introduce simplified, low-cost default funds, known as MySuper.
The new schemes are expected to be included in legislation later this year and are scheduled to be introduced on July 1, 2013.
The general lack of awareness of MySuper could become a headache for the government as the impending changes are likely to force employers to review their superannuation default options.
Some existing default funds may be scrapped because they do not meet the MySuper criteria.
According to Cameron, the 40% of firms that do not intend to reconsider their super products, with the advent of MySuper, are being naïve.
“I think the changes will prompt companies to review a lot of their super arrangements,” he says.
The news comes after an announcement by the Australian Taxation Office that it will continue to monitor the trustees of self-managed super funds in the new financial year as part of its compliance program.
The ATO says it will look at newly-registered funds to ensure they have not been established to “provide illegal early release of superannuation funds to their members”.
It will also monitor SMSFs to check that annual reports are being filed. It is a breach of various tax and super laws if a trustee of an SMSF fails to lodge an annual report.
Loans to members are also being targeted. For example, investing in a family business that might breach the “5% rule” is against the rules. An SMSF can invest no more than 5% of its assets in a related-party transaction.
Cameron says do-it-yourself super funds are much more prevalent at the smaller end of the market, so anyone with a DIY fund should be up to date.
“It’s a regulation thing, which is part and parcel of running a DIY fund, but many people that have a DIY fund say it’s not that onerous to maintain,” he says.