New laws before Parliament aimed at reducing superannuation theft will only cut 16.6 per cent from total underpayments of $5.94 billion, new research has found.
In a submission to Parliament, Industry Super Australia (ISA) said new laws to ban employers from redirecting workers’ salary sacrifice payments to compulsory superannuation guarantee (SG) payments made by bosses would prevent the theft of voluntary contributions made by about 370,000 workers.
Those lost contributions totalled $1.5 billion in 2016-17, which is only 16.6 per cent of total super underpayments for the same year.
That leaves another $4.4 billion worth of super underpayments untouched and workers out of pocket to that amount.
Legislation to close the salary-sacrifice loophole was introduced in the last Parliament but was allowed to lapse.
“The loophole is an unjustifiable arrangement that may leave employees materially worse off by retirement, and is inconsistent with the idea of salary sacrifice for superannuation – salary sacrifice should be for the benefit of employees, not employers,” said Financial Services Council CEO Sally Loane.
But “extra reforms were necessary to address the larger problem”, ISA CEO Bernie Dean said.
“One in three workers is not getting paid super because dodgy bosses are hanging on to it and keeping it inside their business,” Mr Dean said.
Most of the other underpayments resulted from employers simply not making the required payments to workers.
In the case of part-time workers, however, another legislative loophole is to blame. Workers earning less than $450 a month are not required to be paid super.
ISA research found that this applied to 15.6 per cent of workers and this could affect workers who earned well above the $450 limit.
“A multiple job holder with three jobs could have well over $450 per month in wages but receive no employer superannuation contributions,” ISA said in a submission to Parliament.
Quarterly payment a problem
Super contribution payments by employers are only required to be made quarterly, and reporting realities mean workers may not find out the level of payments for another month.
“The delay encourages employers to use withheld employee SG payments to bolster cash flow, and then to underpay the quarterly SG payment when it is due,” ISA’s report said.
A solution to the problem would be for super contributions to be paid with regular wage and salary payments.
“There’s no reason not to pay the SG at the same time as salary and wages because then you know what you are being paid,” said Paul Versteege, policy chief with the Combined Pensioners and Superannuants Association.
A spokesman for building industry super fund Cbus said regular payment with wages would be a boon for unscrupulous employers who send companies bankrupt when they can’t pay their bills, leaving workers out of pocket for wages and super.
The fund has become proactive in following up on unpaid super.
“We receive complaints from members who salary-sacrifice weekly and only have that money paid into their accounts quarterly. Their voluntary contributions are sitting idle for up to three months,” Cbus CEO David Atkin said.
“Cbus invests significant time and resources to make sure that members are paid super correctly. Last year [FY19] we recovered over $99 million for our members. This is a drop in the ocean compared to the overall size of the problem,” Mr Atkin said.
Glen McCrae, deputy CEO of the Association of Superannuation Funds of Australia, said in a recent submission: “We proposed amendments to the Superannuation Guarantee legislation to cover the self-employed, including independent contractors in particular”.
“We also recommended strengthening the ‘sham contracting’ protections in the Fair Work Act 2009 to prevent instances where employers mis-classify workers as independent contractors, in instances where their status should be one of an employee,” Mr McCrae said.
The New Daily is owned by Industry Super Holdings