This budget provides the government an opportunity to ensure women and lower-income Australians get the billions in super owed to them.
Latest figures reveal Australians have been underpaid an eyewatering $33 billion in super over seven years. On average 2.8 million Australians were short-changed a total of $4.7 billion annually.
New Industry Super Australia analysis of the latest tax file data (2019-20) shows 2.4 million Australians were underpaid $4.3 billion.
To end the unpaid super scourge at its source the government should mandate the payment of super with wages in this month’s Budget. Despite what it says on payslips, super can legally be paid quarterly making it difficult for workers to keep track of payments and more challenging to recover what is owed.
The problem impacts more than a quarter of the workforce but younger workers on lower incomes, people working in hospitality, retail and blue-collar trades are disproportionately affected.
Government commitments to beefing up Australian Tax Office enforcement and lifting its unpaid super recovery rate from the dismally low 15% it gathers now are welcome but will not stop underpayments occurring.
Two senate inquiries, consumer groups, advocacy bodies, unions and employers say mandating payment of super with wages will address the $4.7 billion a year problem at the source.
Too many women are at risk of retiring into poverty and the typical woman retires with about a third less super than men. To address this persistent gender inequity, super should be paid on the Commonwealth Parental Leave Scheme and the Low-Income Superannuation Tax Offset should be increased.
Industry funds can play a role investing in projects of national importance, such as affordable housing and a clean energy economy, but only if the policy settings are right and good risk-adjusted returns can be realised.
Stability on super’s policy foundations is vital to unlocking its investment potential in the Australian economy.
To that end the government’s commitment to legislate an objective of super that would enshrine in law the system fundamentals of compulsion, preservation and universality is welcome.
The following ISA policy priorities could deliver more for members by improving the super system by:
- Fixing unpaid super by mandating payment of super with wages, increasing the ATO’s compliance activities, facilitating other actors to assist in recovery, including super in the National Employment Standards and extending the Fair Entitlements Guarantee to cover super in insolvency.
- Tackling inequity in the super system by mandating payment of super with the Commonwealth Parental Leave Pay scheme, reviewing the gender equity of Australia’s approach to retirement incomes, and increasing the Low-Income Superannuation Tax Offset.
- Improving the Your Future, Your Super reforms by expanding the performance test to include 10 years of historical data and all fees and products and by banning workers from being stapled to funds that fail the performance test.
- Protecting the fundamentals of the super system by maintaining the legislated increases to the Super Guarantee, ruling out changes to principles of preservation and compulsion and legislate that the objective of super is to generate income to provide workers with a dignified life in retirement.
Comments attributable to Industry Super Australia Chief Executive Bernie Dean:
“Each year Australian workers are missing out on billions in super they are legally entitled to and that means a less secure future for them and their families.”
“This Budget provides an opportunity for the government to address the problem at its source by mandating that employers pay super at the same time as they pay wages. It’s the right thing to do and it’s affordable.”
“Aligning payment of super and wages won’t just deliver workers more of what they’re owed, it will put all employers on a level playing field and boost government revenue.”
“Super has been a boon for millions already but it’s not perfect and there are long-standing issues that the government needs to address to make sure that more women and low-income earners get a fairer go.”
“There is an opportunity to align members’ interests with the national interest when it comes to housing and renewable energy investments, but it hinges on long-term certainty for super’s policy foundations.”
Figure 1: Total annual unpaid super ($billions), 2013-14 to 2019-20:
Source: ISA analysis of ATO 2 per cent sample file, 2013-14 to 2019-20.
Key Facts:
– Unpaid super has cost Australians $33 billion over seven years.
– On average 2.8 million Australians miss out on a total of $4.7 billion a year.
– Mandating that super is paid with wages will curb the unpaid super scourge
