InvestSMART

Super levy rise a hefty price to pay, for some

THE passing by both houses of Parliament of the carbon tax legislation has created a great deal of interest and controversy. By the responses received to last week's news of the increase in the superannuation guarantee levy to 12 per cent, this move is no less contentious.

THE passing by both houses of Parliament of the carbon tax legislation has created a great deal of interest and controversy. By the responses received to last week's news of the increase in the superannuation guarantee levy to 12 per cent, this move is no less contentious.

QHas legislation also been passed to increase the tax rate to 18 per cent on super as well?

ATo the best of my knowledge neither party has a policy to increase the tax on super contributions to 18 per cent. Given Tony Abbott's opposition to the tax concessions for super, and his preference for the age pension, it will be interesting to see what superannuation policies the Coalition comes out with.

QI employ four people in a small business, including my wife and me. We are to receive a 1 per cent business tax cut but I feel this will be wiped out by the rise in super contributions paid by me from 9 to 12 per cent. Am I correct?

A I am not sure what tax cut you are referring to. If it is the 1 per cent cut in the company tax rate, this does not actually result in less tax paid by you as the owner of the business. It only means there will be more profit left in the company.

The other tax cut I know of is the one linked to the carbon tax. In this instance, the tax-free threshold is to be increased but the low-income tax offset is to be cut from $1500 to $445. This will result in a reduction in personal income tax of about $300.

You are right about the increase in the SGC to 12 per cent in effect being an increase in the tax paid by all businesses. When the SGC was introduced it was done as a trade-off, with the unions reducing demands for wage increases. With this latest increase, there is no trade-off. Big business will more than likely be able to pass on the increased costs as price increases.

Small businesses will more than likely have to absorb the increase and, when combined with the resulting increase in workers' compensation insurance and payroll tax, could threaten the viability of struggling businesses.

QThe money that an employer "compulsorily contributes" to my super comes from where? Is it my money contributed on my behalf by the employer, or is it the employer's money, begrudgingly contributed to my super because the government orders it?

A The contribution is a cost to employers and, although contributed on behalf of the employee, is not a cost to them unless they are employed under a salary-packaging arrangement.

Questions can be emailed to super@taxbiz.com.au

Max Newnham's book, Funding your Retirement A Survival Guide, is available in bookstores and as an e-book.


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