Finance Your Super New report estimates ‘staggering’ impact of unpaid super

New report estimates ‘staggering’ impact of unpaid super

Old man with his wallet
Some retirees are thousands of dollars worse off. Photo: Getty
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A Senate hearing on Wednesday will hear disturbing new claims that unpaid superannuation is leaving vulnerable workers tens of thousands of dollars poorer in retirement.

A joint report by Industry Super Australia and the Cbus fund released late last year estimated that one-third (2.4 million) of entitled workers were denied superannuation payments owing to them in 2013-14.

An average of $1489 was estimated to have been either delayed or never paid, although the tax office disputed the figures.

Hospitality workers were identified by Industry Super as being at “high risk” of superannuation underpayment, along with workers in tourism, retail, construction and manual labour. Photo: Getty

At a hearing in Melbourne on Wednesday, Industry Super will present a follow-up analysis to a Senate committee which will show that the Australians who seemingly weren’t paid their super had overall fund balances $19,709 (or 47 per cent) lower than those who were.

Matt Linden, director of public affairs at Industry Super Australia, said this suggests underpayment is “very systemic” and “not just a one-off”.

If these were isolated incidents, or if employers were simply taking advantage of a loophole that allows them to delay payment, then the average difference would presumably be much lower.

The fact the average difference in account balances was almost $20,000 suggests the unpaid amounts were never paid, and that these were not isolated incidents, he said.

“The difference is staggering. It’s tens of thousands of dollars across most income groups in the lead-up to retirement,” Mr Linden told The New Daily.

“Some people have asserted that for many of these [affected workers], it’s just a one-off thing, but this analysis seems to suggest in fact that it’s not. For those people who were underpaid, they’ve got materially lower balances than others in similar circumstances who were paid their entitlements.

“It could well be something that’s occurring for a number of years that’s having an accumulative effect on their superannuation balances.”

Like last year’s research, the new report was also based on data provided by the Australian Taxation Office. It sorted the cohort into nine categories of age and by six categories of wage and salary. No matter what assortment of age and wage was used, the estimate was the same: “markedly lower” super for the underpaid.

According to the new analysis, underpaid workers aged 60 to 64 on salaries between $50,000 and $75,000 who weren’t paid their superannuation in 2013-14 had overall super balances $35,089 (or almost 40 percent) lower than those who were.

unpaid superannuation
Click on the table to expand. Source: Industry Super Australia

These were not forecasts: the research compared actual super fund balances.

However, the ATO has been wary of estimating underpaid superannuation, as it finds it a “challenging” task. On average, it goes after about 1 per cent of Australia’s estimated 880,000 employers for underpaid super each year.

“Though the ATO has established and published credible and reliable gap estimates for some taxes, an estimate for [superannuation] is still under development. While the methodology is considered to be sound there is in a statistical sense a low level of confidence,” it wrote in a submission.

The ATO also described Industry Super’s 2016 estimates as “not … reliable” and “too high” and that the report “substantially overstates the prevalence”.

Industry Super’s new findings will be presented to the Senate economics committee, which is examining the issue of superannuation underpayment.

The rough rule of thumb is that employers must contribute 9.5 per cent of a worker’s wage to a super fund if they are over the age of 18 and earning more than $450 (gross) a month. This is known as the ‘superannuation guarantee’ or ‘SG’.

Currently, employers administer these payments on behalf of their workers. This means the amounts are processed by their payments department or, in the case of very small businesses, by the boss personally.

While a worker’s super usually appears on each of their pay slips, these payments can legally be delayed until a month after the end of each quarter. This means your super fund may be growing only once every four months.

Wednesday’s hearing at Parliament House in Melbourne is expected to focus on the scale and size of SG underpayment, rather than possible reforms. It will hear evidence from Industry Super and the ATO, each for an hour.

The New Daily is owned by a group of industry super funds.

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