Employer Superannuation Contributions

[Duckman#72]

Hi All

When is a tax not a tax?

There is an article in todays Australian Financial Review which quotes Paul Keating as saying "the 9% (compulsory) superannuation contribution was never designed to be a tax. I should know as I was treasurer - it should not be considered a tax".

However Dick Warburton, head of the current inquiry into tax, says "It is a tax impost on employers because they have to pay it. It is a complusory payment so therefore it does become a tax."

Isn't it wonderful how politicians like to view their time in the sun with rose coloured glasses.

What do others think? Are complusory superannuation contributions a "tax" should they be in their own special category called "complusory government imposed payments"?

Duckman

 

[ghotib]

Of course they're not a tax; they're part of the employees' pay. Might be an impost, but so is annual leave.

Did you see Gittins' piece on the tax inquiry today? IMO this inane comment from Warburton confirms Gittins' opinion of that the inquiry is pure theatre.

Cheers,

Ghoti

 

[Prospector]

Yes, it isnt a tax but it is an additional expense that you have to consider when employing someone and it may be just the thing that stops you doing so.

As an employer I got irate the other day when I read that most people dont have enough super to fund their retirement so "of course we must make the employer contribute 16% instead of 9%". :swear: How can they blithely say the employer is responsible to fund the difference - how about cutting the Tax on super funds instead of making the employer pay once again. Who would take on the risk of employing anyone!

 

[Smurf1976]

I'm more worried about the ridiculous gap between wage rises and house price rises in recent years than Super. If the dire predictions of ongoing rampant house price inflation are correct then a major wages breakout is surely on the way. We're talking about a lot more than 9% to simply bring the balance back to the mean and this is a real threat to business IMO.

Boom and bust. We've just had the boom.

 

[Duckman#72]

Of course they're not a tax; they're part of the employees' pay. Might be an impost, but so is annual leave.

I disagree. It may be semantics but it is a tax imposed on employers. The majority of employees may consider it part of their overall salary package but would not see it as their wages (which they see as disposable income).

I'll tell you why it's not an employees pay. Employees do not have access to this money until retirement (except for exceptional hardship). It has been designed to provide for an employees life after work - to ease social security burden. Get it - the government either increases taxes to cover pensions or they get employers to pay a "contribution" for the individuals. Either way the money gets to the retired employee from the employer. In other countries - their are taxes that are specifically allocated towards pension and social security payments - and this is exactly that.

You make the argument that it is the same as annual leave - no it isn't. Annual leave, sick leave and long service leave are all part of disposable salaries that may or may not be used for retirement purposes. The access to it is immediate.

I strongly agree with your comments Prospector. Rates going up to 16% - please!!!! How about they make the employee do some hard yards for a change. Make voluntary contributions more tax effective. The Government is raking in far too much to consider reducing the 15% tax rate so the best thing seems to be to make the employer contribute more. It does nothing to stimulate the job market.

Call it what you like - but it is a tax.
Duckman

 

[Duckman#72]

I'm more worried about the ridiculous gap between wage rises and house price rises in recent years than Super. If the dire predictions of ongoing rampant house price inflation are correct then a major wages breakout is surely on the way. We're talking about a lot more than 9% to simply bring the balance back to the mean and this is a real threat to business IMO.

Boom and bust. We've just had the boom.

Yeah I know - we have spoken before about the problem of serious wage increases. Don't forget wages and super go hand in hand. An additional $5000 a year to an employee means almost $500 extra in super. This isn't always seen as part of the true cost of employment.

 

[Goin' For Broke]

Being self employed it irks me to no end why the govt will kick $1500 for every $1000 in extra contributions for employees, but not for the self employed! Why??? Small business is kicked in the guts again. Why do we take it? I don't employ people because of all the red tape and expense of super, work cover, long service etc etc. I don't get any of that. If I don't contribute to my own super then I have nothing, If I get sick and can't work I get nothing. Nobody is paying me while I'm on holidays. Sorry had to get that off my chest.
Cheers.

 

[bvbfan]

Self employed do get concessions for contributions to super on their own account and for spouse, I suggest you see a tax agent or financial planner who is able to advise you in more detail.
Maybe the tax office will be off help too

 

[ghotib]

I disagree. It may be semantics but it is a tax imposed on employers. The majority of employees may consider it part of their overall salary package but would not see it as their wages (which they see as disposable income).

I'll tell you why it's not an employees pay. Employees do not have access to this money until retirement (except for exceptional hardship). It has been designed to provide for an employees life after work - to ease social security burden. Get it - the government either increases taxes to cover pensions or they get employers to pay a "contribution" for the individuals. Either way the money gets to the retired employee from the employer. In other countries - their are taxes that are specifically allocated towards pension and social security payments - and this is exactly that.

I wish I'd read the article!!

I agree with you about employee perceptions, but I still think that compulsory contributions are not a tax because they're not government revenue and government can't spend them. The money doesn't go to government (except for unfunded public service funds, but that's another story); it goes to superannuation funds. From the government point of view, compulsory super is the same as private medical insurance.

You make the argument that it is the same as annual leave - no it isn't. Annual leave, sick leave and long service leave are all part of disposable salaries that may or may not be used for retirement purposes. The access to it is immediate.

I was thinking that annual leave etc. and compulsory super are alike from the employer's point of view: they're all part of the cost of an employee, even though they're not a tax as such. I think that's what Prospector was saying, but I don't know if it's the point Dick Warburton was making in the AFR article.

I strongly agree with your comments Prospector. Rates going up to 16% - please!!!! How about they make the employee do some hard yards for a change. Make voluntary contributions more tax effective. The Government is raking in far too much to consider reducing the 15% tax rate so the best thing seems to be to make the employer contribute more. It does nothing to stimulate the job market.

FWIW I just saw Nick Minchin saying in the Senate that the super tax rate is part of the review. Not that I think the review is a real review, but I'd hate to think something couldn't be true just because a politician said it.

Call it what you like - but it is a tax.
Duckman

Call it what you like - but it's not a tax

Ghoti

 

[ghotib]

Being self employed it irks me to no end why the govt will kick $1500 for every $1000 in extra contributions for employees, but not for the self employed! Why??? Small business is kicked in the guts again. Why do we take it? I don't employ people because of all the red tape and expense of super, work cover, long service etc etc. I don't get any of that. If I don't contribute to my own super then I have nothing, If I get sick and can't work I get nothing. Nobody is paying me while I'm on holidays. Sorry had to get that off my chest.
Cheers.

Have you read any of Robert Kiyosaki's books? He reckons that self-employment is the hardest possible way to generate an income for exactly the reasons you talk about. Self-employment on top of a strong investment portfolio is fantastic; self-employment to support a bank or two, a dependant or 4, and yourself was tougher than I cared to think about while I was in it.

Go good!!!

Ghoti

 

[crackaton]

Self employed do get concessions for contributions to super on their own account and for spouse, I suggest you see a tax agent or financial planner who is able to advise you in more detail.
Maybe the tax office will be off help too

True. I believe every contribution you make comes off your taxable income, generally.

Not much good though if your working yourself into an early grave or have to work in retirement.

 

[Prospector]

Being self employed it irks me to no end why the govt will kick $1500 for every $1000 in extra contributions for employees, but not for the self employed! Why??? Small business is kicked in the guts again. Why do we take it? I don't employ people because of all the red tape and expense of super, work cover, long service etc etc. I don't get any of that. If I don't contribute to my own super then I have nothing, If I get sick and can't work I get nothing. Nobody is paying me while I'm on holidays. Sorry had to get that off my chest.
Cheers.

Totally with you there Goin' for Broke! We have an employee who gets paid more than we do, wants to monopolise all the admin support because she has PRIORITIES and now wants to discuss a pay rise! Talk about

 

[Mumbank]

I'm also self employed and battling to get ahead, although with kids it allows me flexibility of hours to run them around ad nauseum.

Apart from Compulsory Super, LSL etc etc making employers think twice about employing staff what about all the carry on about PAID maternity leave, PAID kids sick leave, and PAID child care!!!!!!!!!!! For heaven's sake I'm not against women, or men for that matter, being able to take unpaid leave to have a child, but why oh why does anyone think they should be paid to stay at home and bring up their children. Get a grip! soon young women will be totally unemployable unless they can produce a Dr's certificate saying they are sterile!!

PS I am a woman, I just don't believe in the welfare mentality of take, take, take.

 

[Prospector]

We are a small company - 2 personal assistants. One is currently on maternity leave and we have hired someone who is very good on a 12 month contract to cover ML. I know the girl on ML wants more than 1 child and wants another as soon as she can, which I suspect will be when her first child is 6 months old (15 month age gap).

This is the scenario we will be facing in a few months time - ML person returns to work after 12 months, and is already 3 months pregnant with the second. She will then take another 12 months ML approx 4.5 months after she returns. In the meantime we have had to let our contract person go because we cant afford to have 3 assistants (nor do we have the space), but in less than 5 months we will need her again. But she will have picked up work elsewhere so we will have to go thru the recruitment and then training process with another contract person! Only to have the cycle repeat itself!



We cannot afford all this - small business cannot afford this

 

[crackaton]

Hate to say it, but women tend to rort the system in this respect, and you can't legally fire them.

 

[Prospector]

Ah, but you see it isnt considered as rorting the system, just obtaining their entitlements! Which is true, but obviously no-one ever thought of how ML would operate in practice! Or maybe they thought that people would only have 1 child

Whatever, it sucks and like you say there is nothing anyone can do!

 

[Rafa]

i thought with the new IR changes, small businesses can now sack people, free of the burden of unfair dismissal claims...

 

[Duckman#72]

Self employed do get concessions for contributions to super on their own account and for spouse, I suggest you see a tax agent or financial planner who is able to advise you in more detail.
Maybe the tax office will be off help too

Yes I think Goin for Broke's point may have been that while self employed people can in certain circumstances claim a tax deduction for their personal contributions they are not eligible for additional funding from the Government like the $1.50 per $1 deal for employees.

Cheers

Duckman

 

[crackaton]

They are if they are sole traders.

 

[Duckman#72]

They are if they are sole traders.

What do you mean Crackaton?