From April 1 business owners face new superannuation obligations which threaten to significantly increase labour costs
From April 1 business owners
face new superannuation obligations which threaten to significantly increase labour costs.
Industry groups did win in their attempt to delay the onset of the scheme, which will force companies to pay the 9 percent super levy on ordinary time earnings inclusive of ‘regular, normal, customary or usual’ overtime payments.
The Australian Taxation Office (ATO) originally planned to introduce the revised super obligations on July 1, 2008 but will now hold off until April 1 of this year.
Despite the delay, industry groups still fear the revised scheme will lead to a spike in employment costs, which will force companies to cut costs by turning to contractors at the expense of employees.
“As labour costs represent a large proportion of total operating costs, cost-cutting is likely to involve a reduction in employment,” warns consultancy firm Meyrick and Associates, which has analysed the impact of the change on the nation’s transport industry.
Meyrick adds that almost all of the transport industry will be affected “due to the common incidence of overtime work for yard staff”.
It is common for transport companies to pay up to half a driver’s salary as overtime.
According to the firm, a transport operator with as few as 20 drivers may have its super obligations jump by as much as 52 percent.
“In dollar terms, a large operator with hundreds of employees could incur a $780,000 increase in its total employment cost, though this amount will vary a great deal between firms,” Meyrick says.
Operators liable under the new scheme will also be hit with higher payroll taxes and insurance premiums, which the Australian Road Transport Industrial Organisation estimates will increase by as much as 6 percent.
It says the ATO’s ruling may add an extra 5 percent to an operator’s annual labour costs.
The ARTIO says the problem will be exacerbated because super obligations will increase without any productivity or efficiency gains.
It says there are instances where drivers earning $55,000 may actually take home up to $100,000 a year depending on the amount of overtime worked.
Under the ATO’s ruling, ARTIO argues companies will need to pay the 9 percent super obligation on the extra $45,000.
The organisation also criticised the ATO’s decision to link super to regular overtime work, saying determining what constitutes ‘regular’ is subjective and hard for a company to abide by.
“Determining when a driver’s additional hours become sufficiently ‘regular, normal, customary or usual’ could only be made in hindsight and only after the due date for contributions had passed,” the ARTIO argues.
Additionally, there are concerns drivers on a cents-per-kilometre rate will be treated better than those paid by the hour.
Meyrick argues those on the former rate will always receive payments because they are renumerated according to the amount of work completed.
But, as the ARTIO claims, transport workers paid under the hourly rate will only receive super on their standard 38 hours if working ‘regular, normal, customary or usual’ overtime.
According to the industrial organisation, the change will lead to a shift away from employee drivers.
“The draft ruling would contribute directly to a reduction in employment levels across our industry and a shift from full-time employment to contract labour,” the ARTIO’s submission says.
In an attempt to scrap the proposed changes, industry has attempted to remind Prime Minister Kevin Rudd of his commitment to help businesses and individuals weather the economic crisis.
“These outcomes are in direct contrast to the current focus of the Government in response to the state of the global economy and therefore should not be supported or pursued in the current economic climate,” the ARTIO argues.
But the concerns, rather than delaying the onset of the changes, have had no impact. The Government is still backing the scheme and the boffins are still hard at work, pursuing the issue deep within the confines of the tax office.