Unpaid super loophole harms confidence


By Daniel Paperny

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The government’s move to address a legislative loophole that allows employers to avoid paying the full super guarantee (SG) entitlement to staff should be lauded and give greater confidence to those looking to make salary sacrifice contributions, according to the Financial Services Council (FSC).

Last week, minister for revenue and financial services Kelly O’Dwyer announced the government would respond to a key recommendation of the Superannuation Guarantee Cross‑Agency Working Group with a greater focus on cross-agency collaboration to improve the super system for Australians.

O’Dwyer said the government was set to introduce a bill before parliament in the coming months aimed at ensuring individual’s salary sacrifice contributions do not reduce their employer’s SG obligation.

“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,” O’Dwyer said.

FSC chief executive Sally Loane agreed, saying the long-term sustainability of Australia’s super system was built on the confidence of the Australian public and missed super entitlements could have an “enormous” impact on the level of retirement income consumers receive.

“It is vital that consumers are protected from wrongdoers that seek to take advantage of the superannuation system for their own ends,” Loane said.

But Industry Super Australia public affairs director Matt Linden told financialobserver while the government’s announcement was welcome, it did not go far enough as it would help only one in 10 workers affected by unpaid super.

“Laws could be strengthened to provide legal avenues for employees and super funds acting on their behalf to recoup payments,” Linden said.

Linden said the Australian Taxation Office had failed to “come to grips” with the problem despite having comprehensive data available to identify individual taxpayers at risk of underpayment.

One solution Linden put forward was amending the Superannuation Guarantee Administration Act 1992 to require employers to pay super more frequently to prevent them using those payments for business cash flow.

“Almost half of small businesses currently pay more frequently than quarterly [and] simple amendments to the [Act] are required to require more frequent payment,” he said.

“New Single Touch Payroll technology which will take effect from July 2018 will provide real time information to the ATO on employee income and super. However small business is currently exempted which will mean there will be no information for half the workforce.”

The comments follow findings from a senate inquiry in March which revealed a compulsory superannuation shortfall of $5.6 billion that affected almost 3 million Australians or 32 per cent of entitled workers at an average of $2025 each in the 2014 financial year.

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