Employers cheating Australian workers by withholding super: report
About a third of the workforce is being cheated out of superannuation entitlements by unscrupulous employers, sham contracting schemes and the cash economy
New research from Industry Super Australia and Cbus found underpayment of superannuation reached $4.6 billion in 2013-14.
The mandatory Superannuation Guarantee requires employers to contribute the minimum of 9.5 per cent into super funds of employees aged 18 earning $450 a month.
But the study, using Australian Tax Office and Australian Bureau of Statistics data, identified a loophole allowing employers to pay less super into accounts of employees making voluntary contributions through salary sacrifice.
If, for example, the employee salary sacrificed $1200 a month, and if there was no contract requiring them to make a full contribution, employers could reduce their contribution by the same amount.
The result: the employer saves money and the employee is no better off in retirement.
The study, Overdue: Time for Action on Unpaid Super, found that industries most at risk from unpaid super were the construction, hospitality and cleaning sectors. Workers under the age of 30 were most likely to miss out on super.
It found that small and medium sized businesses were least likely to pay the super guarantee.
ISA wants the loophole fixed.
“Without action, unpaid super and lost earnings will reach $66 billion by 2024,” the report said.
“Younger workers, low-income earners and workers in the construction, hospitality and cleaning industries were most likely to miss out on superannuation.
“On average, affected workers missed out on $1489 or almost four months’ of superannuation contributions.”
The report said older workers and those in professions on higher incomes could also be affected as they use salary sacrifice.
“Employees do not understand that if they salary sacrifice into super, their employer can use this to meet their SG [superannuation guarantee] obligation,” the report said.
“The key motivation for an employee to make additional salary sacrifice contributions is to boost their retirement savings. This loophole should be closed immediately.”
It says the ATO needs more funding for compliance activity.
“Despite improvements in their handling, the ATO remains insufficiently resourced to effectively investigate reports of non-compliance,” the report said.
by Leon Gettler, December 5th 2016
