Unpaid super has received a lot of attention recently, which has not gone unnoticed, and it is currently being put under the microscope by an interdepartmental committee and a Senate inquiry. Employers are required to contribute 9.5 per cent of ordinary time earnings into the superannuation account of every employee earning more than $450 a month. The super guarantee (SG) system has been in place since July 1992, making it 25 years old.
SG is payable quarterly, regardless of how frequently salaries or wages are paid. Payslips record the amount for SG payable for each pay cycle. These amounts may not tie up with actual payment of SG as payroll and superannuation are not always synchronised.
The current system relies heavily on the employee making sure the employer has fulfilled its SG obligations and reporting any underpayment to the ATO.
Checking pay records and remaining vigilant is crucial, and make no assumptions.
Even one of Australia’s big four banks is under scrutiny for allegedly failing to make the correct superannuation contributions for bank staff who have worked extra hours.
A report late last year by Industry Super Australia and Cbus claimed around a third of Australian workers are being ripped off on their superannuation entitlements. The ATO has not historically estimated underpaid or evaded SG, but is trying to arrive at a guesstimate (under development) for the SG leakage. It currently receives about 20,000 complaints from employees each year.
The above-mentioned report also purports some employers are using salary sacrifice super contributions to satisfy their SG contributions. The silly thing is the law allows this to occur, so it is up to the employee to ensure the employer is not short changing them when they decide to salary sacrifice voluntary super contributions.
The law should be changed to prohibit employers from using voluntary contributions to meet their SG contributions.
The lack of engagement with superannuation and an employee’s inability to easily reconcile if the employers have made the correct SG contributions by the required time and correct amount are factors that might explain why most employees fail to report any SG wrongdoings by employers.
While the ATO has responsibility for making sure employers comply with their SG obligations, it finds itself hamstrung as it only receives SG payment information on an annual basis. The introduction of single touch payroll (STP), however, has the potential to greatly improve visibility but only if it involves both payment and reporting. STP is mandated for businesses with 20 or more employees from 1 July 2018. Micro and small businesses where the incidence of SG compliance is more prevalent will not be included in the first round of STP implementation.
The harsh penalty regime for not complying with the SG rules has not deterred employers who work in low-margin sectors who continually look for ways to minimise costs to stay in business. Other employers simply look for ways to gain an unfair competitive advantage by delaying or not paying SG or entering into sham contracting arrangements. Non-compliant employers are unlikely to inform the ATO they have not met their SG obligations.
Until deficiencies in the SG contributions system are addressed, knowledge about your entitlements and vigilance is the best way to ensure you are not short changed. STP will improve the ATO’s ability to monitor non-compliance, but only when it applies to all employers and includes SG liability and payment information. Until then it’s up to employees to monitor compliance