Rise In Payroll Super Unjustified

24 February 2011

The Australian Chamber of Commerce and Industry(ACCI) has today responded to recent calls from advocates within the superannuation industry for government action across the current budget cycle to legislate a 33% rise in the compulsory superannuation levy currently paid by private employers. A 33% rise would see the employer levy rise from 9% of payroll to 12% - at a cost to the business bottom line of over $20 billion a year once fully implemented.

In a letter published in today’s Australian Financial Review (AFR), ACCI’s Chief Executive Peter Anderson said as follows:

The superannuation industry claims that compulsory levies should fund retirement incomes, not choices people make during their working life (Super guarantee lift a must, Letters 22 February).

It’s a convenient argument when spending someone else’s money and then taking a cut on the side.

For baby boomers, if 9% is not adequate then 12% by 2020 won’t help because most will be retired by then.

The Henry Tax Review concluded that there was no general case to raise the 9% compulsory employer levy on the grounds that retirement incomes would be inadequate. It said that increasing the employer levy would be counterproductive and instead proposed adding value to existing contributions through tax concessions.

These facts are swept aside by the superannuation industry in its desire to get hold of another 3% of private employer payrolls. Neither the industry nor the government can guarantee, how increasing the levy these employers, most of whom are small and medium businesses, pay by one third will be funded. Even if unions agreed to wage trade-offs, which they are resisting, most of these employers don’t deal with unions.

The proposed mining tax was never going to pay the employer levy, only government tax concessions. With reduced revenue forecasts from the tax, even the affordability of those concessions is in doubt.

The recent Cooper Review pointed out that lower fees and improved superannuation fund efficiency can add value to retirement incomes equivalent to one third of the proposed levy rise. That’s a much better way to go because people get more chance of having their employers keep them in jobs all the way through to retirement.

ACCI opposes a compulsory rise in the superannuation levy, as do all of Australia’s State and Territory Chambers of Commerce and Industry, and many of the nation’s national business organisations.

Last June when meeting in Adelaide, twenty of these organisations released a signed public Communiqué calling on the government to reject such calls (A copy of the communiqué can be found at www.acci.asn.au).

Since then, the case for a rise in the employer levy has significantly weakened:

  • Trade unions have openly indicated that even in unionised workforces they are not prepared to trade off wages for a rise in superannuation to 12%
  • The Cooper Review into superannuation found that retirement incomes can be increased by forcing efficiencies and lower fees on the superannuation industry
  • The Henry Tax Review recommendation against increasing the 9% levy has been widely welcomed by business
  • Revised revenue forecasts from the proposed mining tax cast further doubt on the capacity of the Commonwealth budget to fund the higher tax concessions arising from the $20 billion in increased employer contributions