Increase in super contributions a tax on business The government this week has been criticised for producing misleading advertising related to improvements it is making to the superannuation system. This is surprising because what the government should have been criticised for was an increase in taxation on business being classed as an improvement to superannuation. Most Australians would understand that when it comes to misinformation, the hierarchy is, lies, damn lies, statistics, political advertising, with campaign promises coming in a dismal last. This ability to bend the truth is not limited to just one party. Before Julia Gillard's campaign promise of "there will be no carbon tax under the government I lead" there was John Howard's promise that "there's no way that GST will ever be part of our policy." The charge of misleading advertising relates to the claim by the Gillard government that the compulsory superannuation guarantee contribution is rising from 9 per cent to 12 per cent. The fact the increase is starting at 9.25 per cent from July 1, 2013, and then increasing over the next six years to 12 per cent, was only disclosed in the fine print. To understand why this increase in the SGC is a tax on business, and not a major improvement to superannuation, you need to go back in history to when the contribution was originally introduced. The SGC started in 1992 as a result of negotiations between the Labor government and the ACTU. It was originally set at 3 per cent of a person's wage. The deal saw the ACTU give up a 3 per cent wage increase. After its introduction the 3 per cent was increased from the 1996 financial year up to its current 9 per cent in 2003. The increases over that period had no corresponding tradeoff for wage increases. These changes, and the increases in the SGC scheduled to start from July 1, 2013, are therefore increases in a tax on businesses rather than a major superannuation initiative. This increase in the SGC cost for employers will result in decreases in the profitability of businesses, an increase in the prices charged for goods and services to fund the increased SGC commitment, or be used to reduce future increases in salaries and wages as an offset for the increase in compulsory super contributions. The likelihood of the increases in the SGC payments being taken into account by unions and Fair Work Australia in wage negotiations and industrial award pay increases is not great. This leaves the very real possibility of there being either an increase in prices or more businesses failing. The Institute of Public Accountants is calling for the federal government to introduce a concessional tax rate for small businesses to compensate them for the increase in SGC contributions. Chief executive of the IPA Andrew Conway said: "We are also concerned as to how small businesses will manage these [SGC] changes; many are struggling to make ends meet as it is. Just ask the question of a retailer paying award rates for employees, how they will continue to do so and remain competitive? If the business sector had been hoping for some help if the Coalition government gets elected in September, it could be sorely disappointed. Not long after the SGC increases were announced, Tony Abbott stated that the increases would stay. Given that both sides of politics are now well into election campaign mode, who knows what promises will be made.