Workers missing out on billions in superannuation each year

Almost a third of employees in Australia are not receiving their full superannuation entitlements, to the tune of $3.6 billion in 2013/14, according to research by Industry Super Australia and the super fund Cbus. But little is being done about this issue, and unless action is taken this could mean $66 billion in unpaid super in the ten years to 2024.

The research, based on ATO and ABS data, indicates that 2.4 million workers – around 30% of employees eligible for Super Guarantee – are not being paid their full superannuation entitlements. According to the report 2.15 million employees were underpaid an average of $1,309 in super in 2013/14 and 277,000 workers in the cash economy missed out on an average of $2,888.

“Younger workers, low-income earners and workers in the construction, hospitality and cleaning industries are most likely to miss out on superannuation,” said the research report.

“It is disturbing that nearly one third of workers eligible for SG are being short-changed,” said Industry Super Australia chief executive, David Whiteley.

“The implications are wider than the individual. Today’s retirement income policies are made on the assumption that, into the future, we’ll all have super. As pension access tightens and home ownership declines, those missing out on compulsory super stand little chance of a decent standard of living in retirement,” he said.

Industry Super Australia and Cbus have suggested a number of policy solutions, including real time payment and reporting of Superannuation Guarantee (SG), facilitating the collection of unpaid SG by super funds directly, better measuring and reporting of the issue, increased powers for regulators, stronger penalties and extending the safety net for the employees of insolvent companies to include superannuation.

ISA/Cbus also call for the closing of a ‘loophole’ allowing employers to count salary sacrifice contributions against SG obligations.

“Employees do not understand that if they salary sacrifice into super, their employer can use this to meet their SG obligation. The key motivation for an employee to make additional salary sacrifice contributions is to boost their retirement savings. This loophole should be closed immediately.” says the research report.

“If the estimate excluded salary sacrifice arrangements, the total amount of unpaid SG for 2013-2014 would be $1 billion higher.”

Mr Whitely said it must be asked if the ATO is properly resourced to tackle the problem of SG non-payment and under-payment, including its “apparent failure to use individual taxpayer data to detect at-risk employees and employers”.

Cbus chairman Steve Bracks said it was “not unusual” to hear from super fund members who had lodged a complaint with the ATO who are still waiting for answers years later.

“One has told us he was advised recovery of unpaid super may take up to 10 to 20 years,” said Mr Bracks.

“Employers who do the right thing by their employees are competing on an uneven playing field against those who don’t,” he said.

The Senate has set up an inquiry into the under-payment and non-payment of Superannuation Guarantee. Industry Super Australia is encouraging workers to make a submission to the inquiry.

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3 Replies to “Workers missing out on billions in superannuation each year”

  1. “… employees were underpaid an average of $1,309 in super in 2013/14 …”

    ” … those missing out on compulsory super stand little chance of a decent standard of living in retirement,”

    So $1,309 x 40 years of work gives a little over $50,000 in today’s value.

    And $50,000 is tne difference between a scent and a non decent standard of living???

    1. Peterrj

      If you apply a return of 5% annual return above inflation on the money, it will work out to approx $160K in today’s dollars over a 40 year period. At 4% it would be $125K, at 6% it is $202K I haven’t done the maths on the increase in pension but I roughly estimate it at $5000 per year over a 20 year period for the 5% yield case

      Better that money in the pocket than not.

      1. Whoops, the pension increase is around $9000K per year – $180pw – more than beer money! As this is an average, many people will be losing considerably more, other less.

        Bob

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