Are you under 34 years of age? Do you work in hospitality, building or cleaning? Do you earn less than $37,000? Are you a man working for a small- or medium-sized enterprise?
If you answered “yes” to any of these questions, you could be owed $1489 or more in unpaid super contributions by your employer.
A new report by Industry Super Australia and Tria Investment Partners shows that under- or non-payment of the 9.5 per cent super guarantee (SG) payments that all workers earning more than $450 a month are entitled to is surprisingly widespread, rising dramatically and cost Australian workers $3.6 billion in 2013-14.
As many as 2.4 million Australians, or 30 per cent of the workforce, have suffered from the super rip-offs. The average affected worker is dipping out on four months of super contributions.
And even if you go to the Australian Taxation Office to try to get recompense it’s unlikely that you’ll get repaid.
“It is disturbing that nearly one-third of workers eligible for SG are being short-changed,” said ISA CEO David Whiteley.
“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.”
ISA’s work estimates that by next June super contribution arrears could jump to $17.07 billion, and $66.8 billion in 2024.
There are two groups of people missing out on super contributions. Underpayment for employees or ‘sham’ contractors totals about $2.8 billion, ISA’s research discovered. And those working for cash are losing about $800 million, according to Tria research done for industry fund Cbus.
ISA public affairs director Matt Linden says the situation is probably worse than the research shows. “We used a very conservative cut-off for contributions of 8.5 per cent when the SG is actually 9.5 per cent and was 9 per cent in 2014-15.”
A legal loophole adds about another $1 billion to the total, Mr Linden said. That is because employers are actually entitled not to respect the wishes of people who make salary sacrifice contributions to their super.
While most employers treat salary sacrifice payments as extra contributions, they are legally entitled to treat them as SG contributions. Some, apparently unbeknown to their employees, do just this and so reduce the SG payments they make for the employee from their payroll by the salary sacrifice amount.
Even if you discover you are being underpaid on super, it is very difficult to do anything about it. The ATO, which regulates the area, in 2014-15 raised just $474 million in SG liabilities as a result of employee complaints. The Auditor-General found that the ATO only collects about half of the SG non-payment it identifies.
Where the ATO finds breaches itself through its audits, things are not much better. In 2014-15 the ATO identified $735 million in tax debts for SG, though only $379 million of that was collected.
What should you do?
Mr Linden says are are some basic things you need to do to ensure you get your entitlements:
- Check the balance in your super account by ringing the fund or going online
- If your employer pays super contributions quarterly, make sure to balance quarterly super contribution records against the figures quoted in your pay slips
- If it looks like you’re being underpaid, in the first instance go to your employer or your union
- Then talk to your fund. They can give you contacts at the ATO
- Contact the ATO if you don’t get satisfaction
ISA says the law needs to be changed to ensure people are getting their full superannuation entitlements. Necessary measures include requiring employers to pay the SG with regular salary payments, not quarterly, and banning the practice of counting salary sacrifice as part of the SG.
The mechanisms that allow super funds to collect unpaid SG should also be improved and the ATO should be better resourced to enforce payment.
Industry Funds Credit Control is engaged by industry funds to collect unpaid SG entitlements and has collected more than $1 billion in the past 20 years.
A recent Productivity Commission report described unpaid SG as “one of the more egregious leakages in the superannuation system”.