Salary Sacrifice change not enough to stop superannuation “robbery”

Share this article:

Stopping employers ripping off workers by using Salary Sacrifice contributions to satisfy their Super Guarantee obligations is a welcome change, but doesn’t go far enough, says Industry Super Australia.

A Senate Committee is currently inquiring into a Bill which would, in part, stop employers counting the Salary Sacrifice contributions of employees against the Super Guarantee obligations of the employer.

Industry Super Australia (ISA) told the inquiry that it welcomes the closing of this ‘loophole’ that “lets employers rip off workers”, but that more needs to be done.

“More than 370,000 workers who think they’re doing the right thing and contributing to their own super are actually being double-crossed by their employers because of this loophole,” said ISA Chief Executive Bernie Dean in a statement.

“This is one part of a much bigger problem. One in three workers are not getting paid super because dodgy bosses are hanging on to it and keeping it inside their business. It’s daylight robbery.”

According to ISA, the proportion of workers impacted by the loophole is around 17% of the total number of workers not being paid their full superannuation entitlements. Analysis of 2016/17 ATO data by ISA found that over 370,000 Australian workers didn’t receive $1.5 billion in total superannuation.

At a public hearing of the Committee, at ATO official said he “wouldn’t say that we are in full agreement or have full knowledge of the methodologies” used by ISA.

“In terms of this specific salary contribution issue, we have not seen evidence that the problem is particularly widespread.”

ISA is calling for superannuation to be paid at the same time as salary and wages, “Federal politicians currently receive their super on pay day, it’s time there was one rule for everyone”.

Dean said: “The Government needs to fix the whole problem – not just part of it. The Government needs to go further and stop unpaid super once and for all by making super payable on pay day.”

The change to the Super Guarantee rules is widely supported, including by a range of industry groups – across superannuation, accounting, and small business.

“Despite the previous Parliament considering legislation to close this loophole, for some reason it was never brought on for debate in the Senate, meaning workers are continuing to miss out on their retirement savings,” said ISA.

Legislation to close the loophole was introduced to Parliament in September 2017 – and lapsed with the election. While the Salary Sacrifice change likely would have enjoyed bipartisan support, this wasn’t the case for the changes to Super Choice included in the same Bill.

Super Consumers Australia supports the Bill, noting it will close the Salary Sacrifice ‘loophole’ “a full 14 years after it was formally acknowledged” – pointing to a 2006 ruling by the ATO that Salary Sacrifice contributions could offset a SG obligation.

The Institute of Public Accountants supports the change, but has called for it to apply from 1 July 2019 instead of the July 2020 start date as set out in the Bill – noting that there has been no explanation for the delay to the date from the original Bill.

“Given the delay experienced to date in getting this loophole rectified, it warrants a retrospective start date to stop the legalised theft of superannuation from employees who are salary sacrificing super contributions,” said the IPA in its submission to the inquiry.

The ATO told the Committee that there were issues with a July 2019 start date, including of retrospectivity because the September quarter is part-way complete and also that a 1 July 2020 date better aligns with Single Touch Payroll.

The Committee is due to give its report by 5 September 2019.

Want to be kept up-to-date with SMSF and Superannuation changes, why not subscribe to our Newsletter?

This article, as with all content on this site, is for informational purposes only, and is not legal, financial, tax or other advice. Please read our Terms and Conditions of Use.

Share this article:

Leave a comment

Your email address will not be published. Required fields are marked *