Increases in compulsory superannuation contributions are scheduled to start next July, but the Economic Society of Australia is asking for a delay, given how badly the economy has been hit by Covid-19. They’re asking that the five consecutive increases either be deferred or abandoned completely.
Compulsory superannuation contributions are the portion paid by employers. The first increase was scheduled to increase contributions from the current rate of 9.5 per cent to 10 per cent next July. The rate would then increase half a percentage point every year until July 2025, when the contribution would be up to 12 per cent.
Ryan Riethmuller, Partner at the Tumut firm Panorama Accounting & Advisory, said he felt like it was in the best interests of Snowy Valleys businesses to have the increase deferred “until the current level of uncertainty has passed.”
“It mightn’t seem like much, 0.5 per cent, but it can add up to quite a bit,” he said. “On top of this the employer also has to pay workers comp and potentially payroll tax.”
The majority of the Economic Society’s members (29 out of 57) agree, saying that now is “not a time to encourage saving”. They felt that in the current circumstances we should be “far more worried about spending power today than in the golden years of present-day workers”.
Only 13 out of the 57 members felt that the increases should continue on schedule. The remaining 15 members didn’t weigh in.
Mr Riethmuller said that Snowy Valleys employers are already considering wage levels and costs, to ensure they can stay operational through Covid-19 and beyond, there shouldn’t be any further changes. He was concerned that job growth might suffer.
“The increase in super and associated costs could be enough of a deterrent to employ that next person, which would have a more immediate impact to the recovery,” he said.
“A deferral of just one year could be enough to provide local businesses with a chance to restrengthen their balance sheet ready for the increased costs.”
Of the 29 economists who wanted the increases to be put off, nine asked for the increases to be abandoned completely. Their general consensus was that it’s more important for wage earners to be spending money today, rather than in the decades to come, and it might discourage other types of investments, like purchasing a home.