Superannuation game changer

By admin . On 09-Sep-2014

Changing the collection process for superannuation saves $billions, drugstore creates increased productivity in the workplace and better connects the owner of the funds with their investments 

The coalition has a policy for the September election that will remove employers from the collection process for superannuation.  If they win then superannuation will be included in PAYG payments to the tax office.  The employers’ involvement will be only about collecting tax.  The owner of the funds and the tax office can then work out what to do with the part of tax that is super and the super component would be sent to the nominated fund manager

The cost to the ATO of distribution of payments would be provided by the fund manager through a ‘commission on funds received’, ampoule ensuring there is no increase in costs for the ATO or any impact on the federal budget. This is based on user pays principles and would be around 1%.

Current and proposed process

Currently if a person is lucky enough to earn $100k a year then the employer will, decease over a year, give them $75k, pay the ATO $25k in PAYG tax and then find over $9k from somewhere else and send that to a fund manager.

We propose that the employer pays the employee a gross salary of $109k, of which we send $34k to the ATO and gives $75k to the employee.  The employee, the person who owns the funds, will inform the ATO on which fund manager to send their money either at tax time or, with support from a fund manager, every pay day.


There will be a general increase in efficiency in the economy, as well as in the management of fund managers. This increase in efficiency will come mainly from saved time and expense for employers and for fund managers.

Some 800,000 employers would no longer have to send money off to over 800 fund managers on behalf of at least 17 million workers.

There will be improved, streamlined communications and processes for fund managers who will deal only with the ATO not with 800,000 employers.  We have calculated this saving as more than $1 billion a year.  That is a lot more money for their members.

Any extra costs for the ATO would come from a management fee of around 1% of funds distributed.  Given that around $30 billion is collected every year that sees a net gain for fund managers of at least $0.7 billion per year.

This approach creates savings for the member/investor, for fund managers and for employers.

Fund manager benefits

Fund managers themselves will benefit in two ways; financially through administrative savings and corporately through having to become efficient in collecting funds and attractive to people making a decision on which fund they should use.

Currently fund managers receive payments from any number of employers (at least tens of thousands in the case of the very large funds).  If a payment is not received the fund manager then needs to contact the employers, threaten the employers, contact members etc.

Under this proposal the fund managers would have one point of contact for contributions– the ATO.

If there are 800k employers and 17 million employees then the current monthly activity would involve allocation of superannuation contributions for around 8m employees with another 9 million employees having contributions lodged quarterly.  This amount of transactions creates constant complicated administration.

There are a myriad of letters being sent to employers and members around contributions and employment details.  Accounting processes are complicated and some 3 million people change jobs every year creating another mountain of paperwork for the funds.  There are at least 480 million actions taken by fund managers through a year.  At an average cost of $3 (it must be more than that!) this amounts to well over $1.2 billion.  Given the funds will have some costs in dealing with the ATO and the ATO will take around 1% for their own costs this sees a saving of almost $1 billion, money that goes straight into the members accounts.

There is no doubt that the red tape reduction for employers will also be considerable.  The saving in time and worry for many smaller businesses will be substantial.

The removal of employers from the collection process creates one big change within the superannuation industry.  The fund owners, the individuals, will no longer be referred to as employees or members, they will be known as investors because that is what they are.  The funds will no longer have a third party collecting their money as the employers will no longer be involved. There will be no need for fund managers to be named in industrial awards or processes.

The funds will have to compete, like any other business, for the attention of new investors/members. Their marketing activity will not be forced onto employers. The funds will have to develop new products that will attract investors, they will need to communicate in a way that the average person will understand. The funds will need to become part of the Australian financial sector competing for funds and changing their products and processes as needed, developing new and efficient ways of collecting and distributing funds.  Under this proposal the fund managers that are poorly managed will either have to get their act together or be swallowed up by other more efficient funds.  There is no doubt that new funds would emerge offering just what people want.  This would change the nature of communications from fund managers.

This approach would also, for the first time, connect the owners of the funds to the management of the funds.  At every tax return time the tax payer would see exactly how much money they have contributed to their retirement.  They then may seek funds that have high returns, or more secure investments or have a choice of ethical or environmental investments.  They may seek funds that support infrastructure development in Australia, or in their local area (and as always APRA would as always be watching very closely to make sure the system does not attract dodgy investments).

This would bring industry fund managers, in particular, into the real world of business where they have to compete for peoples’ money by offering good products. At the moment the industry funds undertake next to no activity in accessing funds as employers do that for them at what is no perceived cost to the fund.

This change in collection also gives governments more flexibility to compensate tax payers who have been out of the superannuation system due to the lack of a job. Any increase in the superannuation guarantee would be managed through the tax system.

The tax system can be used, as it always has been, to gather funds needed to run the country and make society fairer for all people.

Other benefits

There are many other benefits of including superannuation with PAYG.

Taxpayers outside the tax system are more likely to be re-engaged as the ATO will need information to be able to forward payments to their fund of choice.  The need to engage with the ATO would be more compelling for these people as 9%+ of earnings would normally be a substantial amount of unclaimed funds.

The fund managers and employers would have the capacity to better plan and manage cash flow.

Employees would be aware of the full income they are receiving from their employers as their gross wages would now include the super component.

In the case of bankruptcies and business failure the ATO normally has first call on any ‘money due’ and the demands of employees have a much lower priority.  In this proposal the super guarantee component would have the same priority as the ATO, giving some surety in super payments.

There will be no losses or change for members/investors.  The only difference would be the need to provide information on fund managers to the ATO rather than to each employer. Fund manager management activities would become more streamlined and less complicated.

There are no extra costs for employers, only savings and an ability to concentrate on business issues rather than the financial affairs of its employees.

As a result productivity would increase, jobs would be more secure and workplaces would be safer.  The employer can concentrate on making the business profitable and spend the time previously spent on superannuation administration on monitoring safety and health issues in the workplace.

Employees would know exactly how much they earn and where that money is going.  They would know that the employer is no longer involved and does not need to be monitored.

This proposal takes superannuation out of the industrial system, where financial services and investments do not belong, and places it in the taxation system where it does belong.

The Superannuation Clearing House

This proposal is a better option than a superannuation clearing house for small businesses (and the clearing house is a much better option than dealing directly with the funds).  Any clearing house would still involve employers in the process.  In whatever form a clearing house takes, employers will still need to keep records, make payments and deal with some person on super issues.  Even with the clearing house there is no doubt the fund managers would continue to harass and scam employers through incompetence and just the size of the task.  This proposal removes employers from the process altogether.

Why are employers in the superannuation system with no return for effort?

This proposal has come about from one of our members asking the question “Why are we involved in superannuation collection and advice on investments for our employees?” That is indeed a good question.  Businesses, small business in particular, have enough to do with normal day to day activities without this unpaid work.

Fund managers are multi-billion dollar businesses and they distribute profits in the form of investment returns and share dividends as well as paying high salaries and bonuses to a large number of senior staff, trustees and directors.  Employers receive no fee for their activities. Acting as a collection agent for PAYG and BAS is one thing, but to also collect money, at no charge, for large private sector financial institutions seems to be unfair and certainly not in the spirit of the financial services industry.  The banks and financial institutions are quite happy charging for services yet under the super guarantee small business is expected to act as collection agents for the fund managers, without compensation.

Our proposal takes employers out of the superannuation equation and adds some sense and simplicity to the process.

Fund managers object to this proposal

From our understanding the reason this proposal has not been accepted so far (although it is a policy promise of Tony Abbott and the opposition) is that the fund managers, particularly the Industry Funds, have lobbied hard to keep employers in the process as they do not wish to be too close to the tax office.  This creates a question as to why?  Why would they reject a process that saves them $10 billion?

About the author


  • Change management, employment, the economy and local communities – bring back the CES

    31-Oct We have a national crisis with issues associated with skills and employment.  This includes apprent
  • We have a plan – an energy plan.

    18-Oct COSBOA has welcomed the “Powering Forward” energy plan announced by the government yesterday.
  • State Governments Must Act on Energy Prices to Avoid Economic Crisis

    15-Aug Now we have had time to discuss our national energy price crisis, it’s time to take action. State
  • 2017 Vodafone National Small Business Summit – Registrations Open

    19-May Registrations have now opened for the Vodafone National Small Business Summit, in Melbourne on 23 to
  • COSBOA Communique – Fair & Compliant Workplaces

    04-Apr COSBOA Communique - Fair & Compliant Workplaces On Monday 3 April 2017, COSB
  • Efficiency and Fairness in Workplace Relations Getting Closer

    24-Mar COSBOA today congratulated the government and the Industrial Relations Minister Senator Michaelia Ca
  • Penalty Rate Decision Provides Balance for Small Business on Sundays

    23-Feb COSBOA is pleased to see the creation of equity for employees and employers on Sundays with today’
  • Industry Groups Warn Telco Skills Crisis is Worsening

    09-Feb Communications Day publication recently interviewed Dominic Schipano from member as
  • Submission to Productivity Commission

    27-Jan The Council for Small Business Australia (COSBOA) recently made a submission to the Productivity Com
  • COSBOA Budget Priorities Statement

    23-Jan The Council of Small Business Australia (COSBOA) has released it's Priorities Statement for the 2017
  • Submission to Senate Inquiry

    13-Jan The Council of Small Business Australia recently made a submission to the Senate Economics Legislat
  • We thank you 2016 and welcome 2017 with hope and some fear.

    18-Dec There is no doubt 2016,
  • Superannuation payment system needs fixing – employers not the problem

    05-Dec The Australian Government must rethink the superannuation collection system for small business. By p
  • The self-employed – human rights, equity and fairness

    21-Nov Do the self-employed enjoy the same rights as workers and as others? Perhaps they are mo
  • Who pays for the ruling class to travel business class?

    26-Oct   “Attention please: Passengers in business class please take note there is a person dow
  • Make our roads safer, do not ever compromise safety

    20-Sep Small business in the transport sector under threat from union/big business cartels
  • COSBulletin for August – read it now!

    31-Aug The August edition of the COSBulletin is available - click
  • Will Australia be run by three unions and a handful of big businesses?

    10-Aug Will Australia be run by three unions and a handful of big businesses? To ensure we have
  • Congratulations to Senator Katy Gallagher on the Small Business role

    26-Jul COSBOA today congratulated Bill Shorten on the appointment of Senator Katy Gallagher Peter Strong C
  • Leaders to debate innovation at Vodafone National Small Business Summit

    04-Jul Leaders to debate innovation at Vodafone National Small Business Summit Who are the
  • Business Daily:Make Your Vote Count

    30-Jun COSBOA is quoted in an article on Business Daily on today,
  • Vodafone National Small Business Summit in the News

    23-Jun The 2016 Vodafone National Small Busi
  • Over 50% of weekend workers get less than award pay – and it’s legal

    31-May Over 50% of weekend workers get less than award pay - and it's legal (Breaking news - the
  • Marginal Seats and Small Business People – the facts

    20-May As can be seen by the table we have influence in this election.
  • Why we need big business to pay their bills on time

    12-May It is well known that cashflow is the king and queen,
  • COSBOA’s Pre-Budget Wish List…

    03-May COSBOA was invited to submit a
  • COSBOA Response to Superannuation Efficiency and Competitiveness Issues Paper

    29-Apr COSBOA lodged a response to the Superannuation Efficiency and Competitiveness Issues Paper today,
  • Can we resist the old has-beens and embrace real change

    15-Apr The new economy is different: oligopolies beware or begone Here is the
  • Some tax thoughts from some COSBOA members

    11-Apr Most of our members have their views on tax - tax collection,
  • The Velocity of Money – a chance for a simpler tax system?

     Here is an article by Phil Johns the COSBOA Treasurer and the CEO of the National Credit Providers A
  • The Fair Work System needs to be simple and in plain English

    30-Mar Proof that the Fair Work System needs to be simple and in plain English COSBOA not
  • Rod Sims re-appointment augers well for competition

    24-Mar COSBOA and its members are very pleased to see the re-appointment of Rod Sims as Chairman of the ACC
  • A Strong Government Creating Fair Competition

    16-Mar PRESS RELEASE COSBOA today congratulates the Government on their decision to ad
  • Australia is at a crossroads – jobs and living standards are under threat.

    09-Mar Australia is at a crossroads – jobs and living standards are under threat. In a
  • COSBOA Launches the COSbulletin!

    01-Mar COSBOA launched it's new newsletter the COSbulletin yesterday - check it out
  • When two, too big is so big they have no idea what’s happening- aka the Duopoly

    27-Feb Last year Coles admitted to unconscionable conduct against at least 250 companies.  This year Woolw
  • SMART COMPANY: Why unnaturally big is ALWAYS bad for business

    24-Feb Peter Strong's article on why Big Business is bad for business was published today by Smart Comp
  • COSBOA Pre Budget Submission Recommends Changes to Tax & Skills Systems

    17-Feb Council of Small Business of Australia (COSBOA) today released its Pre Budget Submission,
  • A Bellwether – is the government at the behest of big bullies like Wesfarmers?

    02-Feb Recently a group of business representatives met in Tamworth to discuss competition policy.  The me
  • 2016 to start off with a classic battle of big V small – Effects Test

    11-Jan The effects test (strengthening section 46 of the Competition legislation) is the first port of call
  • Have a great Christmas and a profitable healthy 2016

    24-Dec Thanks to everyone for the support in 2015 (you know who you are) and we'll keep the good fight goin
  • The Year that was 2015 – it was pretty good

    19-Dec There is no doubt 2015 was a year of outcomes for the small business people in Australia. In 2015 t
  • Long Service Leave for 3 hours work exceeds belief

    09-Nov There are moves afoot in Victoria to change the nature of long service leave from one of reward for
  • A Smart Petition that will have an Effect

    10-Sep You want competition?  Productivity? 
  • Treasury teamwork handles change better

    05-Aug Is there an emerging team culture in Treasury? There is no question that the last
  • Just for Fun – A Small Business Crossword

    28-Jul Take a break and stretch your mind with our Small Business Crossword! Click
  • Treasurer the Hon. Joe Hockey MP: Tax System needs to be Simplified for Small Business

    17-Jul Federal Treasurer the Hon. Joe Hockey MP addressed the Council of Small Business of Australia’s (C
  • Big Business wrong about section 46 of Harper’s Review

  • Australia Could Learn How to Support Small Business from Europe

     In the closing session of COSBOA’s Vodafone National Small Business Summit today (Thursday 16
  • Mental Health Advocate Awarded 2015 COSBOA Small Business Champion

     The founder of Billie Goat Soap,
  • BILLSON: “We’re on your side”

    15-Jul The Council of Small Business Australia (COSBOA) hosted its first ‘Summit Start Up Party’,
  • Superannuation Governance Changes Should Help Cut Costs for Business

    26-Jun COSBOA welcomes the announcement by Assistant Treasurer Josh Frydenberg for the tightening of govern
  • Small Business and the Nation’s Security

    13-Jun COSBOA: Small Businesses are the eyes and ears of our nation The Council of Small Business A
  • Defence Force reserves celebrate Small Business Supporters

    02-Jun COSBOA is very proud to support the Australian Defence Reserves. Our Chairman Paul Nielsen is on the
  • Response to Mark Latham’s rant about small business people.

    31-May Odd comments from a failed politician - a piece by Peter Strong CEO In the AFR of 30 May
  • Why Labor’s small business finance policy works for COSBOA

    26-May Here is a joint Blog from COSBOA's Chairman and CEO. Bill Shorten in his 2015 budget response propo
  • Netflix tax well and good, but it’s time to add GST to overseas purchases

    12-May  Why is Australia determined to protect offshore businesses at the expens
  • Budget extraordinaire shows respect for people in business

     COSBOA is impressed with a ground-breaking 2015 Federal Budget.  The budget inclusions for small bu
  • Our pre-Budget Newsletter

    11-May Please see our thoughts on the budget and other news
  • Good start to the budget count down for small business

    06-May COSBOA today congratulated the government and in particular Minister Bruce Billson on the announceme
  • Vodafone and COSBOA looking at increasing speed and lowering cost of communications

    05-May The Council of Small Business Australia (COSBOA) has announced Vodafone as its major sponsor for the
  • An Investment Allowance for small business will give the economy a good positive Kick

    30-Apr  The Council of Small Business of Australia and the
  • Accountants and bookkeepers will they only exist in science fiction?

    16-Apr Will accountants,
  • Where are we heading with competition policy?

    15-Apr When the report on Competition in Australia (the so called Harper Review) was released we found it 
  • Australian Human Rights Commission reaches out to business

    31-Mar Last week I attended an
  • Linchpins for small business people? There is a growing number.

     Recent positive and constructive announcements from the federal Small Business Minister Bruce Billso
  • Tax White Paper – start-up discussion on a needed process

    30-Mar Reform of the tax system? It is essential to undertake this activity as it is well overdue.  The go
  • We are flying with Flying Solo and their 74,000 micro businesses

    26-Mar COSBOA is pleased to announce that
  • Time for some proactive thinking about tax, employment, training and small business

    24-Mar COSBOA today released a paper that shows how innovative ideas can be used in tandem with traditional
  • Submission to Productivity Commission on Workplace Relations

    20-Mar Inquiry into the Workplace Relations Framework A response from the Council of Small Bus
  • After 40 years a change in contract fairness

     COSBOA congratulates Bruce Billson and the Abbot government on today’s announcement to extend lega
  • Small Business Champion still championing away

    10-Mar Below is a short comment we received from our current small business champion, Kathryn Bordonaro who
  • Tax – it’s all about getting ready for the future

     The Treasurer Joe Hockey recently
  • Renewable Energy Target will renew innovation – let’s do it.

    26-Feb Bruce Billson and Josh Frydenberg and others in this government are on the way to creating a brand n
  • Employer pays $10k for childcare then another $8.8k as punishment? Remove FBT on childcare and Gym membership.

    15-Feb Below is a copy of the media release,
  • Why we need newsagents and community pharmacy to exist

    11-Feb Coles and Woolworths (with the help of text book toting economists remote from reality) are always t
  • Grow and be healthy, Remove FBT on child care and health, make small business company tax 5%

    10-Feb Leading up to the small business package the government is working on as part of the next budget we
  • There is heat in the Workplace Relations Kitchen

    05-Feb The Productivity Commission has released the
  • Any Senate reform needs to be right for people not just big business

    13-Jan Article by Geoff Fader,
  • Unconscionable behaviour demonstrates need for cultural change

    22-Dec Big businesses that dominate a market place need to show responsibility otherwise people suffer and
  • We wish you a healthy wealthy and wise 2015

    20-Dec Thank you everyone for your support during the year.  In 2014,
  • Coles caught out and now plea bargaining

    17-Dec Finally after years of being ignored by the previous administration the ACCC now listens to the comm
  • Competition and productivity still compromised – We should embrace Minister Billson’s vision not engage in academic back tracking

    17-Nov  COSBOA has provided a response to the Draft Report of the Competition Policy Review 201

    11-Nov MEDIA RELEASE Issued by the Australian Booksellers Association (ABA) and Council of Small
  • Very happy to help regulators learn how to be regulated

    21-Oct For some time we at 
  • The integrity of the tax system

    17-Oct A post from Peter Strong Executive Officer COSBOA. Below is a message we received from a small bu
  • Generic branding kills productivity and innovation

  • Superannuation game changer

    09-Sep Changing the collection process for superannuation saves $billions,
  • Small Business Champion 2014 – Kathryn Bordonaro

    20-Aug Bravo Kathryn!  The bio of Kathryn is below.  The reason Kathryn is our small business champion is
  • We will lead the way, we’re working everyday – latest Song about Small Business people

    15-Aug After twelve months of watching our
  • The small business community has lost a champion – Vale Peter Judkins

    04-Aug The small business community is mourning the passing of one of its greatest supporters,
  • COSBOA commends B20 talks ahead of the NSBS

    23-Jul Small business is seen as the way forward and the key to a healthy world economy by all those who
  • COSBOA response to Competition Policy Review

    22-Jun COSBOA has always held the view that competition policy has failed the small business community.  S
  • What powers do we want for the National Small Business Commissioner?

     Below is our opening statement Please find the response from COSBOA to the Governments discussion p
  • Cost of doing Retail in Australia is about red tape and wages

     See our submission to the Productivity study into the costs of doing retail in Australia -
  • Board of Taxation Response

     GST is annoying and confusing and any FBT issues should rest with the individual who gets the benefi
  • Assessing the 2014 Federal Budget

    13-Jun Assessing budgets is different for small business than big,
  • National Small Business Summit – 7th & 8th August 2014 in Melbourne

    15-May Mark your diaries - It's on again, and it seems like yesterday we were gearing up for the 2013 Summi
  • What has COSBOA achieved? Has there been change?

    26-Apr Our achievements to March 2014   It is a good to sometimes stop and look at what has
  • COSBOA Supports War on Red Tape and Inefficient Compliance

    17-Mar The Council of Small Business of Australia (COSBOA) has congratulated the Federal Government on
  • COSBOA And The Association Specialists – Working together for the good of small business

    24-Jan COSBOA is pleased to announce the appointment of a small business The Association Specialists - to s
  • Commission of Audit Submission – Let’s make things simple.

    02-Jan Below is a copy of COSBOA's submission to the National Commission of Audit -  Summary
  • Review of 2013 – a year of flux

    24-Dec Summary (see full report
  • The height of hypocrisy? Must be the Duopoly.

    20-Dec An article by David Quilty Executive Director The Pharmacy Guild of Australia
  • A win for competition, innovation, the consumer and common sense

    10-Dec The limiting of discounts from Shopper Dockets to 4 cents is a win for competition. The duop
  • Small Business Task Forces Formed

    01-Dec COSBOA has formed various task forces to assist in policy assessment,
  • Duopoly is also a duopsony – that’s not good

    12-Nov Interestingly a little while ago Coles was pinged by the ACCC for claiming that their bread was made
  • Overregulation Threatens Small Business Lending – Terry Moody President of CAFBA

    27-Oct Don’t punish small business for the excesses of the derivatives market. The Council of Small Busi
  • Increasing productivity is a no brainer – or is it?

    10-Oct The Council of Small Business Australia (COSBOA) and Independent Senator for South Australia,
  • Confidence Comes with Certainty

    08-Sep Today we congratulated the Prime Minister elect, Tony Abbott, on his comprehensive election win.
  • Election 2013 Policy Comparison and Commentary

    01-Sep Small business people vote and there are over 2 million of us who provide jobs and incomes to alm
  • The words to the ‘Red Tape Nation’ Rap

    25-Aug Below are the words to the Rap
  • 2 million business people who employ around 5 million other people – important?

    20-Aug The Members of the Council of Small Business Organisations of Australia (COSBOA) know that the next
  • Article by John Strong on Complexity of Regulation for Small Business People

    19-Aug  The Society for Chaos Theory in Psychology & Life Sciences Newsletter Vol.20, No. 4
  • Tax Office talking to small business people through new site

    22-Jul The still newish Australian Tax Commissioner Chris Jordan will be at our
  • Not too late to have small business issues heard!

    09-Jul It’s not too late! There is still time to purchase tickets for our big event of the year – the N
  • Bureaucrats Continue to Ignore Small Business

    08-Jul from Real Estate Institute of Australia 16 Thesiger Court Deakin ACT 2600 Phone 02 6282 4277
  • In the election the small business people will decide the western suburbs of Sydney

    02-Jul The western suburbs of Sydney are a hot bed of self employed people.  There are some 150,
  • The big retail landlords are very different from the smaller landlords – very

    01-Jul Big landlords are very different from other landlords – very   Over many years the Council
  • Can we regulate the regulators? Complete the survey and tell’em!

     Now is the opportunity to get information to the Productivity Commission, and through them the gover