Raising the super guarantee is not a new debate, but it’s definitely not the right time for it to re-emerge, or for the Government to raise the employer contribution to ten percent, writes Paul Rattray.
More than 250,000 New South Wales workers have all but ‘completely wiped’ their retirement savings following the implementation of the Government’s emergency ‘early withdrawal’ superannuation scheme at height of the Covid-19 pandemic.
Industry figures show that more than a million people in New South Wales accessed the scheme which permitted the withdrawal of $20,000 last financial year, and this financial year, if they were facing severe ‘financial duress’.
But it became clear early on that many people were accessing the scheme, just because they could, with disastrous effects on their potential retirement savings. For example, if a 30-year old took out $20,000, they could be as much as $80,000 worse off in retirement.
Young workers in Sydney took the most money of any area in the country, to the tune of $445 million. Total withdrawals are worth about $10 billion across New South Wales alone.
As a result, Industry Super Australia Chief Executive Bernie Dean is urging the Federal Government to follow through on previous promises to lift the super rate from 9.5 percent to ten per cent, to help recoup losses from the scheme.
But this has implications for employers, the majority of which are small businesses.
SMEs employ around 40% of Australia’s workforce, and it’s no secret many are already doing it tough as a result of the pandemic-and-related-recession.
SMEs need more time to get on their feet and feel stable, before higher contributions to employee super are mandated. And, we don’t need anything that could potentially dissuade small business owners from employing people right now.
There’s no doubt that the early release scheme was a worthwhile option when it was announced. At the time, Covid-19 was running rampant globally, and the short-and-long term impacts of the virus both on public health and the economy, were far from clear. The Federal Government’s well-meaning imperative was to provide a range of ways to help Australians keep a roof over their heads, and food on the table.
But many would suggest that despite the Government making access to financial planners easier for those considering withdrawal so they could get professional advice, in hindsight, the negative implications of dipping into super were perhaps not well articulated, and the scheme was possibly ‘too easy’ to access.
That said, the situation is now as it stands, and unfortunately, the onus may well be put on small businesses to make up for shortfalls, unless the Government considers other options such as raising the current caps on personal contributions.
This is not good news for the sector. It’s unclear how businesses will fare when the JobKeeper programme ends in the coming weeks. The other issue facing small business right now is that ‘loan holidays’ are ending.
Business and consumer confidence remains low overall, which means there is still significant pressure on cash flow. Now is not the time to encumber small businesses with added financial burdens.
However, there are some positives. Credit rules are relaxing, which will be welcome news for businesses needing access to finance. There are government assistance schemes, like JobMaker, for employing apprentices. There are also calls for the Federal Government to establish a loan scheme for small businesses, to assist the transition away from other government stimulus measures as they begin to wind down.
If you’re a small business owner concerned about cash flow, or cash reserves, then contact us.
At ATB Partners, we can provide you with accounting, tax and financial planning advice to help you through the uncertain months ahead. What’s more, we specialise in advising small business, so we know the unique issues you face.