Government urged to stop Illawarra’s $100m super loss

Requiring employers to pay super with wages, instead of quarterly, would put a stop

to 55,000 Illawarra workers from missing out on a total of $108 million in superannuation payments in a year.

Industry Super Australia (ISA) analysis of 2018-19 tax file data shows Illawarra workers lost an average of $1960 in a year, missing out on super contributions can cost a worker up to $60,000 at retirement.

Changing federal law so super is paid with wages for all workers would end the region’s unpaid super scourge.

Those most likely to be short-changed are younger workers on lower incomes in either blue collar jobs or in the hospitality and retail industries. Workers in the Whitlam federal electorate lost a staggering $45 million, Cunningham workers lost $35.4 million and in Gilmore lost $27.3 million.

This year the $450 threshold was removed – which meant workers were not paid super if they earned less than that amount a month – and the super rate increased from 10% to 10.5% of wages.

But 30% of Illawarra’s workers won’t get the system improvements full benefits because they are being short-changed.

While most employers do the right thing, some are exploiting an outdated law that allows them to pay super quarterly, often despite what is written on the payslip. Without aligning super and wages, workers lose track of payments and only discover they’ve been underpaid when it is too late.

Because super can be paid quarterly some small business owners succumb to the temptation of using their employees’ super contributions for cashflow, which also leads to underpayments.

Paying super with wages would level the playing field for all employers, stopping the unfair commercial advantage exploitative bosses get by not paying their workers’ full entitlements.

The Australian Tax Office’s patchy enforcement action has only recovered a dismal 15% of unpaid super. With limited enforcement a growing chorus of organisations have backed paying super with wages to fix the problem, including industry super funds, Super Consumers Australia, employer representatives, unions, think-tanks, accounting bodies, law firms and two senate inquiries.

The Labor government’s commitments to creating enforcement targets and including super in the National Employment Standards are welcome but will not stop underpayments occurring, the only way to address the problem at its source is to mandate super is paid with wages.

Super should also be added to the Fair Entitlements Guarantee, the government fund that pays unpaid wages after a company’s liquidation. Many businesses go bust owing substantial amounts of super to workers.

Comments attributable to Industry Super Australia Chief Executive Bernie Dean:

“With super going up, and thousands of lower-paid workers finally eligible to receive it, it’s even more important for the government to make sure workers get what they are owed.”

“There’s a growing number of organisations calling on the government to change the law to make all employers pay super to their employees when they pay wages.”

“By not mandating employers pay super with wages, politicians are effectively standing in the way of millions of workers getting money they’ve earned and undermining their future economic security.”

Table 1: Unpaid super by Illawarra’s federal electorates, 2018-19

Source: ISA analysis of ATO 2 per cent sample file, 2018-19 and ABS data.