Industry Super Australia says changing how often Superannuation Guarantee is paid is a “simple fix” the major political parties could adopt in the election campaign to help fix unpaid and underpaid superannuation.
New research by Industry Super Australia has found that the underpayment of superannuation entitlements over years has caused the savings gap between employers receiving their full superannuation and those who aren’t to ‘blow out’.
An Industry Super Australia (ISA) analysis of ATO data has found that super balances for workers underpaid on Super Guarantee are “significantly” lower than the balances of workers not underpaid.
“This suggests that super guarantee underpayment occurs over several years and leads to cumulative disadvantage.”
“In 2016-17 there was on average, a 50 percent difference in the super balance of a person underpaid compared to a person of similar age and income who received their correct super entitlements.”
Additionally, the gap in super balances between these workers is getting worse. In 2013/14 it was $19,709, but by 2016/17 it had “blown out” to $24,506.
For younger workers it is even worse. Workers under age 25 with wages under $30,000 who have been underpaid super have an, “astonishing”, 81% gap compared to those paid their full entitlements.
“This shows how much damage could be done if the Government continues to fail to act.”
“Underpayment seems to repeatedly affect the same workers and lead to large cumulative differences in their super balances.”
“The cumulative damage of super guarantee underpayment arises because of the weak enforcement action by the ATO on employer compliance – a combination of failing to fine employers who do the wrong thing, and inadequate information systems which don’t measure the super guarantee base of ordinary time earnings.”
Comparing 2016/17 with 2013/14, ISA finds that the number of workers not being paid their full super entitlements has increased by 90,000 – to 2.76 million – and the amount of unpaid employer contributions had increased by $340 million to $5.6 billion a year.
ISA says that there has been “too little action by Government, despite the establishment of a Commonwealth Cross Agency Working Group”.
The research also indicates that around 80% of employers underpaid super are receiving a partial payment, which ISA says makes it harder for the ATO to detect.
ISA also says that “dodgy employers” are exploiting a loophole which allows employers to claim employer Salary Sacrifice contributions against the Super Guarantee obligations of the employer.
“This unfair exploitation has seen 370,000 workers who think they are doing the right thing lose-out on super payments totalling $1.5 billion.”
There was legislation before the Parliament to change this law, but it was included in a Bill which also made changes choice of super fund. The Bill was last debated in November 2017.
Recent changes mean employers could be sent to jail for underpaying super. A Coalition plan to give employers who had underpaid super a 12 month amnesty didn’t pass the Parliament.
“Simple fix” political parties could adopt
ISA Chief Executive Bernie Dean has called on the major political parties to act on what he describes as “systematic exploitation”.
“This should be a wake-up call for the major parties. We are now seeing the cumulative damage the unpaid super epidemic is doing to workers’ super balances and it’s very clear,” he said.
“Allowing employers to continue robbing workers of their super entitlement means these workers are going to end up worse off at retirement.”
“While most employers do the right thing, unless we see action from the major parties this election, those dodgy employers are going to continue taking advantage of lax laws, a weak regulator and insufficient penalties to rip off these hardworking Australians.”
Dean pointed to research which found that over half of Australians believe employers are required to pay super at the same time as salary and wages – when in fact Super Guarantee only needs to be paid quarterly.
Dean said changing this law was a “simple fix” the major political parties could commit too during the election campaign.
“The easiest way to end this exploitation and ensure workers are paid their super is to simply legislate that all employers must deposit money into a workers super account at the same time as they deposit their salary into their bank account,” he said.
“Anything else is nothing more than a band-aid solution that won’t fix the problem and will only see more hardworking Australians have their super entitlements stolen by rogue employers.”