Superannuation for Small Business Operators
The Australian government announced it will increase the Superannuation Guarantee Levy to 12% by the 2019-2020 financial year.
This measure will significantly increase future retirement income to Australian workers through the gradual increase in the Superannuation Guarantee Levy to 12%.
The Superannuation Guarantee Levy will be increased gradually with initial increments of 0.25% on 1 July 2013 and 1 July 2014. Further increments of 0.5% will apply annually up to 2019-2020 when the Superannuation Guarantee Levy will be set at 12%.
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| 2013 – 2014 | 9.25% | ||
| 2014 – 2015 | 9.50% | ||
| 2015 – 2016 | 10.00% | ||
| 2016 – 2017 | 10.50% | ||
| 2017 – 2018 | 11.00% | ||
| 2018 – 2019 | 11.50% | ||
| 2019 – 2020 | 12.00% |
There will be a phased increased to 12% with a three year lead time from announcement. This will allow employers to take in increased superannuation guarantee contributions into account when negotiating future wage settlements. Many employers will also benefit from company tax reductions and the significant lead time will help mitigate concerns. While employers will take increases in superannuation guarantee contributions into account when negotiating future wage agreements, future wage increases are expected to be sufficient to ensure that overall wages continue to grow.
Deferral of higher concessional contributions cap – The general $25,000 concession cap will apply to all individuals from 1 July 2012 to 30 June 2014.
The Australian government’s proposal to provide a higher concessional cap for individuals aged 50 years and over with superannuation balances below $500,000 will be deferred until 1 July 2014. Further, in its mid-year economic statement released in November 2011, the Australian government proposed pausing indexation of the general concessional cap until 1 July 2014-2015, with the higher cap commencing at $55,000.
The following table outlines the Superannuation Guarantee Levy concessional caps:
| 2011 – 2012 | 2012 – 2013 | 2013 – 2014 | 2014 – 2015 expected but subject to actual indexation changes | |
| General Concessional Cap | $25,000 | $25,000 | $25,000 | $30,000 |
| Concessional Cap for Over 50s | $50,000 | $25,000 | $25,000 | $55,000 |
* where the individual’s superannuation balance is less than $500,000
The actual details of the operation of the higher concessional cap for over 50s have not been finalised and will be addressed over the coming two years, in time for implementation with SuperStream and associated reforms. One such reform is an online reporting facility being developed by the Australian Taxation Office to provide comprehensive superannuation balance information.
Getting a head start on the new financial year – preparation is key to efficient and effective financial planning for the 2012-2013 year.
Now is the perfect opportunity to implement effective strategies to ensure you start the tax year off on the right foot. Reassessing your financial goals and record keeping systems is important to consider when preparing for the new financial year.
Set effective goals – The beginning of a new financial year is the ideal time to establish your goals and put in place an action plan to achieve them. Considering your objectives for the coming year early on will ensure you have plenty of time to implement a course of action to help you achieve your goals.
Important things to consider include your retirement planning, present and future investments, maximising your superannuation scheme and reviewing of assets.
Track your progress – Whether it be that the accounting system your business uses it outdated, not working properly, or simply does not suit your needs any longer, it is a good idea to consider your options.
By running your business on an ineffective system you can run the risk of capturing and recording GST information incorrectly, resulting in errors on your BAS returns. This can prove to be a costly error for your company and could be avoided by investing in an effective system. Systems fail for a number of reasons, including incorrect set-up, not being regularly checked/updated and incorrectly classifying GST on transactions.
Save some money – Employers are not allowed to reduce the rate of tax on your pay without permission from the Australian Taxation Office. If you have an investment property you can reduce your withholding tax by completing a PAYG withholding variation. This needs to be completed each financial year.
Having the immediate additional cash flow can lessen the burden of your rental expenses, such as loan repayments.
The information, recommendations, opinions or conclusions provided above are generic in nature and do not express individual advice. You should always consult your professional representatives before taking any action.
AccomNews is not affiliated with any government agency, body or political party. We are an independently owned, family-operated magazine.
