More than 80 percent of unpaid superannuation, amounting to several billion dollars annually, remains unrecovered in Australia. The Australian Taxation Office (ATO), the authority tasked with overseeing superannuation compliance, is seldom penalizing employers who fail to meet their obligations, raising concerns about the effectiveness of current enforcement measures.
Richard Aichinger, a resident of 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, the problem persists. “They just keep getting the answer that, ‘Yeah, they’ll be paying it soon,'” Aichinger recounts, expressing frustration over the lack of action.
Superannuation Guarantee Increase
From July 1, the superannuation guarantee rate increased from 11.5 percent to 12 percent, mandating that an amount equivalent to 12 percent of ordinary earnings be deposited into employees’ super funds by their employers. This change is part of Australia’s broader retirement savings system, which is poised to surpass the UK and Canada in size within the next five to seven years, despite the country’s relatively small population.
However, these ambitious projections hinge on the assumption that the funds are actually deposited as required. The current shortfall in compliance threatens to undermine these goals.
ATO’s Enforcement Under Scrutiny
Misha Schubert, representing the Super Members Council, criticizes the ATO for its lenient approach towards 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. The ATO managed to recover just 17 percent of the $4.7 billion in unpaid super for the 2020-21 period, according to the most recent figures.
“Every week in Australia, $100 million that is owed to workers in super does not make it into their super accounts,” Schubert highlights.
A report from 2024 indicates that 2.8 million Australians are not receiving their full super entitlements each financial year, with an average shortfall of $1,810 per affected worker. The issue disproportionately affects women and those in lower-paid jobs.
Challenges in Addressing Unpaid Super
In 2020-21, the ATO issued 9,594 penalties for unpaid super, yet only 43 percent of these cases resulted in penalties beyond the remediation of the unpaid amount. A Senate Estimates question revealed that fewer than 1 percent of businesses faced the maximum penalty of 200 percent.
In response to inquiries, an ATO spokesperson emphasized the agency’s commitment to addressing non-compliance with superannuation obligations. “We have a focused review and audit program into the non-payment of super guarantee to protect workers and their retirement savings,” the spokesperson stated.
Despite these assurances, individuals like Aichinger express dissatisfaction with the ATO’s responsiveness. After reaching out to his local federal MP and the Minister for Employment and Workplace Relations, Aichinger received a call from the ATO acknowledging his son’s complaint but offering no timeline for resolution.
Industry-Specific Risks and Potential Solutions
The Australian National Audit Office has identified construction, accommodation and food services, and retail as high-risk industries for superannuation underpayment. In 2022, the ATO’s efforts in addressing unpaid super were deemed only “partly effective.”
Currently, employers must pay superannuation quarterly, but proposed “payday super” legislation could require payments with each paycheck starting next year. This change aims to protect workers by ensuring more frequent deposits and reducing the risk of non-payment.
Trent Lund, CEO of superannuation clearing house Wrkr, supports the move towards payday super. “The frequency of pay is much faster, which means the errors will be detected earlier,” he explains, highlighting the potential for reduced risk to employees.
Technological Interventions
Technology, such as Single Touch Payroll (STP), could further mitigate unpaid super issues by providing real-time reporting to government agencies. Since its mandatory implementation in 2019, STP has facilitated more timely and accurate superannuation payments.
“It gives the ATO the real-time capability to make sure that workers are being paid their super on time and in full with every pay cycle,” says Schubert.
The ATO has invested in data matching and risk models to identify non-compliance, but critics argue more proactive use of these tools is necessary.
A Broader Problem
For families like the Aichingers, the struggle with unpaid super is not new. Richard’s eldest son, a fourth-year carpentry apprentice, also faced similar issues early in his career. Despite reporting the problem to the ATO, it was only through persistent personal intervention that the owed super was eventually paid.
Advocates are calling for more robust mechanisms to recover unpaid super, particularly for those without the resources or support to advocate for themselves. As Australia continues to refine its retirement savings system, ensuring compliance with superannuation obligations remains a critical challenge.
