SMALL BUSINESS LIKELY TO BE HIT HARD BY SUPER CHOICE
The start date for superannuation choice is 1 July 2005 yet many small business owners are still not even aware of this new legislation. The choice rules will only apply to superannuation guarantee contributions and not to salary sacrifice contributions.
Small businesses will face the toughest challenge making superannuation payments to a number of funds instead of currently just a few. Potentially the number of superannuation payments made each month or quarter could match the number of employees. This is another example of an unnecessary burden imposed on small business which is struggling to cope with complex tax laws and BAS lodgement obligations, staffing and industrial relations issues, collecting debts, etc.
Chartered Accountant, Joe Kaleb, of www.australianbiz.com.au, advises that the legislation will be costly to implement particularly in the first few weeks of operation. Small businesses will have to cope with extra paperwork and implementing new systems. It is unlikely that business owners will have the time, skills and expertise needed to understand how the rules will apply to their workplace and will have to hire experienced financial advisors thereby adding to the cost.
For small businesses some implications that could flow from super choice are:
- A reluctance to employ staff and instead use independent subcontractors to avoid these super and other costly employee obligations. This is already happening in the building and construction industry.
- Risk of litigation by employees if the employer doesn't choose an appropriate default fund or the fund chosen doesn't provide the employee with adequate death cover insurance.
- The potential to create friction in the workplace as some employees are not eligible for super choice. Though choice is also an opportunity to create staff goodwill where the employer manages the process efficiently and uses experienced financial advisors.
- Risk of substantial penalties for not complying with the choice rules. A penalty of $500 per employee applies each quarter or notice period. For example, an employer with 10 employees could potentially be hit with a $5,000 non tax deductible penalty each quarter or $20,000 per annum. However we can expect some leniency from the ATO in the early stages of super choice implementation.
A major issue with super choice is that employers cannot provide financial advice (which would include selecting a default fund) unless they hold an Australian Financial Services licence and will need to exercise extreme caution when providing any advice to employees. Accountants cannot also provide financial product advice unless they are properly licenced. This will create a new industry for financial planners which it is hoped won't come at a big cost to small business.
About Australianbiz
Australianbiz is a website devoted exclusively to small and micro businesses and functions as a tool to assist business owners to better manage their business and income tax obligations. The site is continually maintained by practising accountants and contains handy finance tools, various calculators, business templates, business articles and monthly business tax updates. Also included is a facility to obtain quotes on small business and professional indemnity insurance, plus tools to help business owners find the right accountant and much more.
For further media information or to arrange comment please contact:
JOE KALEB
B.Bus, Master of Taxation, CA, FTIA
Practicing Chartered Accountant
Founder & CEO
AUSTRALIANBIZ PTY LTD
Email:enquiry@australianbiz.com.au
Web: www.australianbiz.com.au
