More than 80 percent of unpaid superannuation in Australia, amounting to several billion dollars annually, remains unrecovered, with the Australian Taxation Office (ATO) rarely penalizing employers who fail to pay it. This alarming statistic highlights a significant issue within Australia’s mandatory retirement savings system, which aims to safeguard the financial future of its workforce.
Richard Aichinger, a concerned father from New South Wales, reports that his 19-year-old son, a second-year electrical apprentice, has not received superannuation payments for over a year. Despite reporting the issue to the ATO at the beginning of the year, there has been no resolution. “They just keep getting the answer that, ‘Yeah, they’ll be paying it soon,'” Mr. Aichinger says, expressing frustration over the lack of action.
Superannuation Guarantee Increase and System Challenges
From July 1, the superannuation guarantee rate will increase from 11.5 percent to 12 percent, requiring employers to contribute this percentage of employees’ ordinary earnings into their super funds. While this increase aims to bolster retirement savings, it underscores the importance of ensuring that these contributions are actually made.
Australia’s retirement saving system is poised to become the second-largest in the world, surpassing those of the UK and Canada within the next five to seven years. However, this growth is contingent on the effective enforcement of superannuation payments.
ATO’s Enforcement and Recovery Efforts
Misha Schubert, representing the Super Members Council, criticizes the ATO’s lack of stringent enforcement against non-compliant employers. “The ATO needs to be a strong cop on the beat and really lift the bar on its compliance and recovery efforts,” she asserts.
“Every week in Australia, $100 million that is owed to workers in super does not make it into their super accounts,” Schubert highlights.
In the 2020-21 financial year, the ATO managed to recover only 17 percent of the $4.7 billion in unpaid super, issuing 9,594 penalties. However, only 43 percent of these penalties required businesses to pay beyond the owed amount.
Impact on Workers and Industry-Specific Challenges
A 2024 report by the Super Members Council reveals that 2.8 million Australians fail to receive their full super entitlements annually, with an average underpayment of $1,810 per affected worker. The report also identifies that one in four workers misses out on compulsory super payments, with women and lower-paid workers disproportionately affected.
The Australian National Audit Office has identified construction, hospitality, and retail as high-risk industries for superannuation underpayment. Despite the ATO’s efforts, many workers, particularly those in vulnerable positions, struggle to recover their owed super.
Potential Solutions: Payday Super and Technological Advances
To address these issues, there is a proposal to introduce “payday super,” which would require employers to deposit super contributions on the same day as wages. This change, if legislated, could significantly reduce the risk of underpayment and improve compliance.
Trent Lund, CEO of superannuation clearing house Wrkr, supports this initiative, noting that it could prevent businesses from using super funds to manage cash flow issues. “The frequency of pay is much faster, which means the errors will be detected earlier,” Lund explains.
Additionally, the implementation of Single Touch Payroll (STP) technology, which mandates real-time reporting of payroll information to government agencies, could enhance the ATO’s ability to monitor super payments effectively.
Looking Ahead: The Need for Stronger Enforcement
Despite technological advancements, the ATO’s current enforcement measures appear insufficient to address the widespread issue of unpaid super. Richard Aichinger’s experience with his son’s employer highlights the challenges faced by many workers in recovering their entitlements.
As the debate continues, stakeholders are calling for more robust enforcement mechanisms and legislative changes to ensure that all Australians receive their rightful superannuation contributions. The future of Australia’s retirement savings system depends on the effective resolution of these challenges, ensuring financial security for millions of workers.
