Government crackdown on employers who don’t pay their super

Introduced in 1992, Superannuation Guarantee (SG) – that is, the compulsory superannuation system for Australian employees – remains highly topical more than two decades on.

Changes to the super system are constant, and add complexity to the process for the superannuation industry, advisers, and of course employers and employees.

Public and parliamentary debate about elements of the SG system, its transparency and the ATO’s administration of it are well-canvassed issues, but the hot topic of late is unpaid superannuation by employers.

This may come as a shock for anyone who has taken the words “guarantee” and “compulsory” at face value.

Speaking at an industry conference in October, ATO Deputy Commissioner, Superannuation, James O’Halloran, reflected that “super is, more than ever, front and centre in the mind of many in the community”.

“The mandatory payment of SG by employers to their employees’ super funds is central to our super system,” Mr O’Halloran said.

“It ensures the future retirement incomes of Australian workers while simultaneously creating significant investment opportunities for the country’s future.”

Despite concerns about unpaid super, an ATO report in August found that non-payment remains the exception to the law.

The ATO found that 95% of the estimated $54 billion in total SG due to be paid to employees was paid. The tax office estimates the net SG gap for 2014-15 was 5% or $2.85 billion of the estimated total $54.78 billion required to be paid in that year.

“We recognise, however, that any non-payment affects employees and is unacceptable,” the deputy commissioner emphasised.

The Turnbull Government’s SG reform package showed similar intolerance for non-compliance.

Minister for Revenue and Financial Services Kelly O’Dwyer established the Superannuation Guarantee Cross‑Agency Working Group – a partnership between the ATO, Treasury, The Department of Employment, ASIC and APRA – in December 2016 to develop recommendations to deal with SG non-compliance.

A chief recommendation of the Working Group’s Superannuation Guarantee Non‑Compliance report released in July was to close a loophole enabling “unscrupulous employers to short‑change employees who choose to make salary-sacrifice contributions into their superannuation accounts”.

The Working Group’s deliberations also resulted in the ATO increasing its focus on SG compliance and promising improved information-sharing across agencies.

The Government’s super reform package announced in July includes a commitment to strengthen the SG prudential framework to ensure a “more transparent and accountable compulsory retirement savings system”.

In August, the Government announced further changes to “modernise” the SG by giving the ATO “near real-time visibility” over SG compliance and providing the ATO with funding for a Superannuation Guarantee Taskforce to crackdown on employer non-compliance.

The bottom line: employers must ensure they meet their legal super requirements to avoid incompliance. If you’re in doubt about your responsibilities as an employer or employee please contact First Super for more information.