ATO estimates extent of Super Guarantee gap for first time

The ATO has, for the first time, given its estimate of the Superannuation Guarantee gap – the amount of Super Guarantee employees are entitled to but not receiving.

The ATO estimates the Super Guarantee (SG) gap to be 5.2% of the $54.78 billion in SG owning in 2014/15, or $2.85 billion. Between 2009/2010 and 2014/15 the net SG gap is calculated to be $14 billion.

“While this analysis shows that 95 per cent of the estimated superannuation guarantee is paid to employees, the gap exists because some employers appear not to be meeting their super guarantee obligations either by not paying enough or not paying it at all,” said ATO Deputy Commissioner James O’Halloran.

“Superannuation has a vital role in providing for people’s retirement, and any non-payment is of concern,” he said.

“The ATO has a range of strategies and activities in place to educate, support, monitor and enforce compliance by employers. We encourage people to report instances of non-payment to us and we respond to every one of the approximately 20,000 reports of possible non-payment of SG from employees or former employees we receive each year.”

The same day as the ATO released the SG gap estimate the Government announced a package of reforms to tackle SG non-compliance, including requiring small employers to use Single Touch Payroll.

Superannuation, Super Guarantee (SG) gap estimate ATO

Superannuation, Super Guarantee (SG) gap estimate ATO

Data source: ATO – Superannuation guarantee gap

Note that these figures use the ‘net gap’ calculated by the ATO, which includes Super Guarantee paid as a result of compliance activities.

Industry Super Australia welcomed the “long-awaited” release of the ATO figures.

“The ATO is to be commended for finally releasing this data knowing full well questions would be asked as to why so much money is not being paid without detection,” said Industry Super Australia public affairs director Matt Linden.

“With a compliance regime that is highly dependent on employee complaints and employer self-reporting it is no surprise billions in unpaid super is going unchecked,” he said.

“With more than 80 per cent of unpaid super going undetected, rogue employers know the chances of getting caught are slim.”

“This is not how a compulsory system which is meant to guarantee contributions should work.”

The release of the Super Guarantee gap estimate by the ATO comes after a Senate inquiry was “surprised at the ATO’s apparent reluctance to engage with the issue of producing an SG gap, particularly as the matter has been raised in numerous reviews dating back to 2010″.

One of the recommendations of the Superannuation Guarantee Non-Payment inquiry was that: “the ATO prioritise its work on calculating and publishing an accurate, reliable estimate of the SG gap. Additionally, the committee recommends that the ATO commit to publishing the SG gap annually in order for progress to be tracked over time.”

Related: ATO policing of Super Guarantee non-compliance “inadequate”: Senate inquiry

The ATO said it had “worked closely” with tax experts, other government departments, industry stakeholders and overseas tax offices in developing and validating the method to estimate the SG gap.

“As a result of this rigorous assurance process we are confident that we have an estimate that is reliable and credible,” said Mr O’Halloran.

“Undertaking an estimation of the Superannuation Gap will provide a useful insight into the operation of the superannuation guarantee system and allow the ATO to assess the effectiveness of our strategies to reduce the level of non-payment of superannuation guarantee.”

Mr O’Halloran said that ATO was increasing its proactive SG case work by one third this financial year, has improved the analysis of data to detect non-payment and is working more closely with other government agencies to share information.

The ATO expects that Single Touch Payroll will, over time, allow for better identification of SG non-compliance. The tax office also also now meets quarterly with APRA, ASIC and the Fair Work Ombudsman to monitor the operation of the Super Guarantee system.

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