The rise in labour costs for small businesses as a result of the increase in the superannuation guarantee (SG) from 9 per cent to 12 per cent is likely to be minimal for 2013/14, according to Australia's peak superannuation body.
"The increase in labour costs due to the SG increase in 2013/14 is likely to be minimal given that wage negotiations (both collective and individual) would take the SG into account when setting wages in that year," Association of Superannuation Funds of Australia (ASFA)
chief executive Pauline Vamos said in a submission to Treasury.
"Typically nominal wages grow by around 3 per cent a year, in line with general growth in prices and increases in community living standards.
"An SG increase of 0.25 per cent or 0.5 per cent in later years similarly would be relatively small relative to other labour cost increases incurred by both small and large businesses."
ASFA said even if there were no offsetting effect on wages, the required increase in the price of goods and services produced by small businesses in order to offset the increase in the SG would be relatively small.
"While the exact percentage would vary from small business to business, the ABS (Australian Bureau of Statistics) figures indicate that on average a 0.25 per cent increase in labour costs could be offset by a 0.036 per cent increase in prices," Vamos said.
"The full 3 per cent increase in the SG would be covered by a 0.44 per cent increase on average in prices."
ASFA said both amounts were very manageable, particularly given the full SG increase was proposed to be phased in gradually over seven years.
Besides, small businesses were to receive a number of tax concessions, it said.
The amount of increased SG contributions in dollar terms paid by small businesses is likely to be around $300 million in 2013/14 and a further $300 million or so in 2014/15.
Other proposed government measures would deliver tax savings to small businesses that exceeded those amounts, ASFA said.
ASFA yesterday published its submission on the Superannuation Guarantee (Administration) Amendment Bill 2011, which will legislate the increase of the SG and will raise the age of an employee at which the SG no longer needs to be provided from 70 to 75, with the intention of removing the age limit altogether.
The cost of the measure to small businesses has been a sore point for the opposition, which initially opposed the increase for this reason.
But the coalition recently changed its view and now says it would not repeal the measure if it formed government at the next election.
