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The super peak body has called for urgent legislative reform of the Australian superannuation system to ensure citizens are not being deprived of the full transformative benefits.
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‘Clock is ticking’ for payday super legislation, says SMC
02 September 2024
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New research by the Super Members Council (SMC) has highlighted unpaid super in Australia is an enduring problem, costing around $5 billion a year.
SMC said the unpaid super scourge needs to be immediately addressed by the government to ensure Australians are not at a disadvantage when it comes to super entitlements.
The analysis shows the scale of the challenge and the need for urgent legislative reform and stronger compliance action.
The super body has called on the Australian government to legislate that super must be paid on payday, set unpaid super recovery targets for the ATO, and support workers to claim their super after insolvencies.
SMC said the government’s compensation scheme for workers ‘the Fair Entitlement Guarantee’ should be extended to super, as unpaid super is often discovered once a business has become insolvent.
If the government actively establishes these recommendations, it can be assured Australians will be paid their super on time and in full.
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SMC CEO Misha Schubert said “the clock is ticking” for Parliament to enact the promised reforms.
The reforms will be crucial in enabling businesses to plan for the payments and ensuring millions of Australians are paid their super.
“Paying super on payday will modernise the super system and should hugely reduce underpayments,” Schubert said.
“It’s an excellent example of reform to benefit super fund members, which will make super fairer for workers and employers alike.”
SMC said while most businesses are doing the right thing, legislative reform is still necessary to stop rival firms that are not paying staff their full super entitlements from inflicting significant disadvantages.
In the SMC analysis of unpaid super, it was found 2.8 million Australians missed out on $5.1 billion in legal super entitlements over one year from 2021–22.
It was also demonstrated Australians have missed out on $41.6 billion in unpaid super over the last nine years.
The average affected worker missed out on $1,800 in super in a year, which equates to more than $30,000 less in retirement savings for a typical worker.
According to SMC, their analysis showed this unpaid super issue will continue to get worse with Australians losing more money at a higher average if not addressed by the government.
Schubert said a unified push is needed to get the message across to those who can make a difference in the super space.
“Unpaid super locks too many Australians out of the full transformative benefits of the retirement system and leaves people poorer when they retire,” she said.
Based on an SMC analysis of the ATO’s 2 per cent sample tax file, people who are most likely to have unpaid super include women, people in insecure work, migrant workers, and younger workers.
Workers in their 20s who earn less than $25,000 a year have a one in two chance of being unpaid their super, SMC said.
“A key driver of unpaid super is an outdated payment system that allows super to be paid once a quarter,” the peak body said.
“This mismatch payment schedules between wages and super makes it difficult for workers to track underpayments and harder for the ATO to use its real-time monitoring tools.”
Schubert said the Australian government has pledged to enact payday super reforms by 2026, but legislation is yet to be introduced to Parliament and implementation is not clear.
“Legislation to pay super on payday, combined with a stronger ATO enforcement regime and better support for workers to claim their super after insolvencies, is crucial to ensure millions of Australians who are currently being short-changed are paid their super on time and in full,” she said.
The government is yet to set unpaid super compliance and recovery for the ATO that was a commitment they made in 2022, Schubert said.
“We stand ready to work with the government, parliament and other key stakeholders to enact those pivotal reforms and ensure Australia fixes the stubbornly persistent unpaid super problem.” Schubert said.
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