Small businesses win with new superannuation clearing house

The Government will push ahead with the establishment of a superannuation clearing house that will allow small businesses which are required to make payments into multiple funds on behalf of their employees to make one single payment to a Government body.

The legislation supporting the establishment of the clearing house passed through the Senate yesterday. The Opposition voted against the Bill, but the support of independent Senators Nick Xenophon and Steven Fielding was enough to get the Bill through.

The clearing house service will be provided free to small businesses with less than 20 staff and will be run by Medicare.

SMEs making superannuation contributions to numerous funds will be able to make one electronic payment to the clearing house, which will then process the transactions. In addition, the Government says small businesses that choose to use the clearing house service “will have their legal obligation to make superannuation contributions discharged when payment of the correct amount is made to the clearing house.”

Small Business Minster Craig Emerson described the passing of the legislation as a win for small business.

“Despite the Coalition’s attempted obstruction, the Government is delivering on its election commitment to establish the clearing house and reduce the red tape burden for small business.”

However, not everyone is happy with the creation of the new Government-run clearing house.

Peter Philip, chief executive of private sector super clearing house SuperChoice, which has 40,000 SME customers, runs one company that is likely to be affected by the creation of a cut price competitor.

“Undoubtedly when you have a competitor as large as this, with unlimited funds and as much influence as the Government has, that’s going to create some market distortions

“We have customers and stakeholders that have invested a lot of money to develop an electronic payments system and we don’t see why the Government has needed to reinvent the wheel.”

While the Government has argued that it did not want to outsource the clearing house because of concerns about the safety of employer funds, Philip points out the vast majority of Australia’s $1.1 trillion superannuation sector is run by the private sector.

“As a taxpayer, I do ask why we need to do this when there were proposals to do it for a lot less money.”

In order to combat establishment of the clearing house, SuperChoice recently launched a services called S-Pay, which also offers free clearing house services to businesses with less than 20 employees.

“We’re comfortable with competition. We’ve got 40,000 small businesses using out business. We’re not afraid to go out and compete on our merits.”