The 2014-2015 audit of the ATO found that as many as 11% to 20% of employers are not making the correct superannuation contributions for their employees. This potentially adds up to a shocking $2.6 billion in unpaid super every year.
The ATO says that non-compliance with super contributions is mostly seen with small businesses and industries that mostly pay employees in cash or as contractors. Unfortunately, this largely affects lower-paid and younger employees who are paid in cash or on temp contracts – those for whom every dollar of super counts.
Super non-compliance for these employees means more people relying on the Age Pension later in life, and a larger drain on government coffers.
And as the ATO points out, even contractors are entitled to super.
What your employer should be paying you
Is your employer contributing the right amount to your super fund? Here’s how you can tell:
- If you earn $450 or more before tax per month, your employer must generally contribute 5% of what you earned to your super fund. This is not taken out of the $450 or more that you earned, but is a separate amount paid straight into your super fund.
- They must pay super at least 4 times a year by the end of each quarter. These amounts will show up in your payslips or your payment summary.
- When you check your super fund – and you should make a habit of doing that regularly – you should see that the contributions have been added.
- When you check the ATO’s website for lost super, you should find that your Tax File Number (TFN) does not have any unclaimed super in any other super funds.
Check your latest payslips and if your employer has not been contributing the correct amount, contact them immediately to find out why not.
If your employer does not correct their error and backpay you the correct amount of superannuation, you can lodge an enquiry with the ATO using their Employee Superannuation Guarantee calculator tool. In 2014-2015, the ATO received more than 18,000 employee complaints about non-payment of super contributions, and they conduct 5,000 to 6,000 audits of employers every year.
How collecting unpaid super could fix the Federal Budget
In a surprising move, the government has made a proposal in September to reduce penalties on employers who pay late. At the time, an estimated 650,000 Australians were missing employer super contributions – but the ATO and the Treasury had been asked by employers to make it easier for small businesses to “fess up” by reducing the penalty.
Under the current rules, employers who don’t make the required super contributions must pay:
- The required contribution – based on total earnings, which is higher than the usual ordinary time earnings
- A superannuation guarantee charge
- A fine equal to the contribution
- 10% interest per year that the contribution has been left unpaid
If they don’t pay the superannuation guarantee charge, the overall penalty is doubled. There are also fines of up to $5,400 for employers who don’t have comprehensive records of their superannuation contributions paid to their employees’ super funds.
Under the proposed changes, the interest penalty is much less, and employers do not have to pay superannuation on the total earnings. This sends the message to employers that they don’t have to pay superannuation if their business in trouble – that the superannuation payments are in effect still “their money”, not their employees’ money. But a business should not be allowed to continue if it cannot meet its legal obligation to pay its employees their full wages, including superannuation contributions.
Michael Pascoe, contributing editor to Sydney Morning Herald‘s ‘BusinessDay’, says the best way to collect unpaid super is not to remove penalties. Instead, he proposes that the ATO be assigned the task of collecting superannuation funds at the end of each tax year and distributing them to super funds. He points out three advantages to this method:
- The ATO already has a system in place that functions smoothly and efficiently, captures everyone in the workforce, and is already responsible for supervising and regulating superannuation in SMSFs.
- Lost super would be found again. Few workers are even sure if they’ve received the right amount in super, or where to look for lost super.
- The ATO could include the more than 10% of our workforce that is classed as self-employed and help these workers to take up the incentives for them to contribute to their own super.
It’s not a new idea – Pascoe suggested this 5 years ago during the Cooper movement – but we live in hope of a change to a system that protects workers already on low incomes.
Be sure of your super obligations
- For individuals: https://www.ato.gov.au/Individuals/Super/Keeping-track-of-your-super/
- For employers: https://www.ato.gov.au/Business/Super-for-employers/
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