How much
super should you have right now and how much do you really have?
The Industry
Super/CBUS report Overdue:
Time For Action On Unpaid Super was published in November 2016.
The report
states:
Introduced in 1992 at
three per cent in lieu of a wage increase and as a means of boosting retirement
savings, the Superannuation Guarantee (SG) is now a matter of right.
Today, employers are
required to contribute at least 9.5 per cent (up from 9.25 per cent in 2014) to
the superannuation accounts of every worker earning $450 plus a month.1
In doing so, Australia
has amassed a $2.1 trillion savings pool that, in shifting economic winds,
increasingly holds both the nation and its people in good stead.
However, two new reports
suggest some employers are undermining the system by not meeting their payment
obligations. Separate analyses conducted by Industry Super Australia (ISA) and
by Tria Investment Partners for Cbus indicate the non-payment of superannuation
entitlements could be widespread and, in dollar terms, increasingly
significant. These findings suggest further work is needed to fully understand
the scale of this problem with consequential changes in ATO audit activity.
It also
states:
Responsibility for
ensuring SG payments are made rests almost entirely with individual employees.
High levels of
disengagement, low levels of financial literacy and extreme information
asymmetry mean that employees are ill-equipped to determine or address SG
non-compliance.
Those most at risk of
not having their SG contributions paid are younger, lower income earners
working in industries with high levels of casualisation and sham contracting,
including construction, cleaning and hospitality.
Small and medium-sized
businesses are least likely to pay SG.
And that:
While individual
experience may vary enormously, average impact of SG non-compliance is the loss
of 7 months of contributions for
a person earning the average wage in 2014.
Put baldly
this report highlights the fact that Without action unpaid super will reach $66
Billion by 2024.
Key points in
the report:
Two new reports suggest
retirement incomes are being undermined by employers who are not meeting their
Superannuation Guarantee (SG) obligations on behalf of workers.
These reports estimate
that employers failed to pay at least $3.6 billion in SG contributions in
2013-14. The two components of the combined estimate are:
•
Underpayment of SG for PAYG employees and sham contractors which Industry Super
Australia (ISA) estimates was at least $2.8 billion in 2013-2014
•
Unpaid superannuation for workers employed in the cash economy which separate
research by Tria Investment Partners for Cbus estimates added an additional $800
million.
This equates to 30 per
cent of workers not being paid part or all of their compulsory super.
Younger workers, low
income earners and workers in the construction, hospitality and cleaning
industries were most likely to miss out on superannuation.
On average, affected
workers missed out on $1,489 or almost 4 months of superannuation
contributions.
Using Tria’s projections
and its own, ISA estimates that unless action is taken, unpaid superannuation
will amount to over $66 billion by 2024.
These estimates are
conservative - using a compliance benchmark of 8.5% of assessable income rather
than the statutory rate of 9.25% in 2013-14. If these estimates took into
account a loophole that allows employers to count employees’ voluntary
contributions, via salary sacrifice, towards their SG obligations, the problem
would be greater.
Government action is
warranted. It should:
•
Urgently investigate these new estimates
•
Undertake detailed analysis of the types of industries and employers that do
not pay SG
•
Adequately resource the Australian Tax Office (ATO) to recover unpaid SG
•
Immediately close the loophole that allows employers to count salary sacrifice
amounts towards their SG obligations
•
Investigate the feasibility of introducing real-time payment, reporting and
compliance of SG using new Single Touch Payroll (STP) technology
•
Introduce a direct, clear, enforceable mechanism for superannuation funds to
recover unpaid SG from employers on behalf of members
•
Retain existing penalties against employers who fail to pay SG and introduce
stronger penalties, including personal liability for directors of companies
that do not meet those obligations
•
Extend the government safety net that protects unpaid wages and entitlements
when a company becomes insolvent to protect unpaid superannuation.
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