The Turnbull government’s move to close a loophole allowing bosses to divert workers’ salary sacrifice superannuation payments deals only with the “tip of the iceberg” in a $5.6 billion unpaid super problem, according to Industry Super Australia.
And the Australian Taxation Office appears powerless to collect many unpaid super debts for legal reasons.
“Only 48 per cent of the total superannuation guarantee charge raised against non-compliant employers is collected by the ATO, often because the employer is insolvent,” the report of the Superannuation_Guarantee Cross Agency Working Group, released on Friday to Revenue and Financial Services Minister Kelly O’Dwyer, said.
Currently superannuation debts are collected by the ATO and company directors can avoid them where companies become insolvent.
“Providing legislation to allow members, super funds and unions to collect unpaid superannuation would be a useful measure,” Matt Linden, ISA public affairs director, said.
Some industrial agreements already allow super funds to collect unpaid super and the model has worked, he said.
Ms O’Dwyer on Friday committed the government to legislating to ban employers redirecting salary sacrifice payments to cover their own obligations to make super guarantee payments for their workers.
“Some employers have in fact been doing the wrong thing. If Australians are to continue to have confidence in the integrity of the superannuation system, we must ensure employers are paying workers their full entitlements, whether they are wages or superannuation,” Ms O’Dwyer said.
Research by Industry Super Australia and Cbus found a “conservatively calculated compulsory superannuation shortfall of $5.6 billion that affected almost three million, or 32 per cent of super-entitled workers, at an average of $2,025 each in 2013/14, “Mr Linden said.
The research identified $1 billion in misdirected salary sacrifice payments, far less than the total of underpayments.
Cbus, one of the sponsors of the research into unpaid super, also called for more action.
“Closing a loophole that allows employers to shortchange employees who make extra salary sacrifice super contributions is welcome, but will only help one in ten affected by unpaid superannuation,” said Cbus CEO David Atkin.
Matt Linden said along with beefing up collection legislation, there were a number of other reforms that need to be made to overcome the super non-payment problem.
“The law needs to require super contributions to be paid more frequently. It should be at least monthly, instead of quarterly at present,” Mr Linden told The New Daily. “It is essential to stop super payments being used for business cash flow.”
Low Income Workers
Currently only those earning $450 or more from one employer must be paid the super guarantee. “This limit should be scrapped as its not necessary in the current environment,” Mr Linden said.
The limit hits women hard with 42 per cent of women earning less than $450 a month from one employer not receiving super.
“Over 70 per cent of unpaid super relates to small business. So the ATO’s Single Touch payroll system needs to be extended to businesses with less than 20 employees,” Mr Linden said.
The Single Touch system is due to be introduced from July 1 2018 for companies with 20 or more workers. Extending it to small business would allow real time tracking of super and wage payments by the ATO.
Peter Strong, CEO of the Council of Small Business Australia, told The New Daily that super should not be collected by employers to simplify the process. “It should be left in PAYG tax collections and workers could tell the ATO where they would like it sent.”