COSBOA calls for SMEs to be relieved of super distribution task

The Council of Small Business of Australia is calling for the Australian Taxation Office to take on its role of collecting and distributing superannuation payments, arguing the current system is too complex and an unfair imposition on SMEs.

Under COSBOA’s plan, superannuation guarantee contributions would be included in an individual’s pay, and collected as tax as part of the pay-as-you-go process.

The superannuation component of the tax deductions would then be extracted from the PAYG contributions by the ATO or another nominated organisation. The ATO would then distribute the superannuation contributions to the relevant funds, based on information from the taxpayer.

COSBOA executive director Peter Strong says its plan would provide minimum savings of $246 million a year, and put a stop to SMEs doing the work of the private sector for no financial return, and risking fines from the Government for mistakes.

“We believe that an individual in business is being asked to do the same activity as a paymaster from a big business, which is not normally possible,” Strong says.

“Small business people collect over 30 billion dollars every year and send it off to super funds for no financial return for our time or effort.”

But CPA Australia senior policy adviser for super, Michael Davison, says while the idea might work for employers, for employees, the ATO and taxpayers, it could be a different story.

“It has merits in that it ensures that superannuation guarantee gets paid, which is a problem we have at the moment,” Davison says.

“But it’s a huge change for the ATO from being a collector to distributor.”

“It’s also going to be expensive, and it will shift costs from employers to taxpayers, so everyone will pay.”

“And if super is recognised as remuneration, which is what it is, and if you’re paying it as a part of your pay, once you know where it’s going it should be automated,” Davison says.

Davison adds that for employees, there will be a lag in addressing different elements of their superannuation, such as salary sacrifice arrangements, and the COSBOA plan does not sit well with the Government’s push to reduce the number of people on low-incomes needing to submit tax returns.

CPA Australia also points to the Superannuation Clearing House, which is run by Medicare and targets businesses with fewer than 30 employees.

But COSBOA says its plan is superior because the Superannuation Clearing House still involves small business in the process.

“Any clearing house will still involve employers in the process. In whatever form a clearing house takes, employers will still need to keep records, make payments and deal with some person on super issues. This proposal removes employers from the process altogether,” Strong says.