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Phase in the start date or give companies with less than $5 million turnover a waiver, urges the lobby group.
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Payday super will punish small business, says NTAA
04 November 2023
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The payday super proposals fail to allow for the roller coaster cash flow of many small businesses and punish them disproportionately with compliance costs, the NTAA says.
In its submission on the proposals, the tax body urges the government to make concessions such as waiving payday super rules for businesses with less than $5 million in turnover, deferring the start date or redefining the payment deadlines.
NTAA spokesperson Andrew Gardiner said the body was concerned that applying payday super to small businesses or closely held entities would hit them unfairly compared with larger employers.
“It is crucial that any tax and superannuation policy protects the interests of small businesses and recognises the unique challenges that apply to these businesses,” he said.
“The NTAA’s submission highlights how important it is that any payday super reform finds an appropriate balance between protecting the legal entitlements of employees of small businesses, and protecting the interests of small business employers.”
The NTAA agreed the idea would force employers to make superannuation contributions more regularly and enable employees to monitor payments.
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But it said the one-size-fits-all proposal would disadvantage small businesses.
“One of the biggest issues for small business taxpayers relates to the disproportionate cost associated with introducing these measures for these taxpayers,” the NTAA said.
“In this context, costs relate to adjusting reporting systems, the time needed for a small business owner to ensure that the correct amount of superannuation has been paid, at the correct interval, and to the correct superannuation fund.
“These are responsibilities that small business owners incur directly and represent further pressures on a sector of the business community that is already struggling.”
It said laws that compelled an employer to align super with wage payments would “directly affect the management of cashflow”.
“In many cases, these measures will demand employers make superannuation contributions for their employees despite the employer experiencing cashflow difficulties,” it said.
“Under the current law, businesses have three-plus months over which to fund their employee superannuation payments, thus allowing them to manage their cash flow over this period.”
“Accelerating the payment of SG will remove the ability of small businesses to do this, which will be impactful for those affected.”
It said in response, some unscrupulous small businesses might decide to amend the pay cycle.
“For example, a small business employer may decide to revert from a weekly pay cycle to a monthly pay cycle. Adjustments of this nature by an employer ultimately penalise employees and effectively undermine the objective of the payday super reforms.”
It recommended that companies with a turnover of less than $5 million be excluded from the payday super measures or adjustments be made to the timing of the change.
“Phasing in tax compliance changes has previously been undertaken by Treasury and the government,” it said, “for example, different implementation dates applied to different types of employers when the STP measures were introduced.”
It also suggested defining the payday super due date differently for large and small businesses.
“Under this recommendation, a small business or closely held entity would be required to revert from quarterly payments (under the current law) to monthly payments rather than progressing immediately to a payday regime.”
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