Research conducted by Industry Super Australia and Cbus used data from the tax office and ABS to estimate that nearly a third (30 per cent) of Australian workers are being short-changed on their superannuation entitlements, to the tune of $3.6 billion in 2013-14.
That equates to an average of $1,489 for each affected worker.
SMEs were the most likely to be underpaying their employee entitlements. Under the current Superannuation Guarantee (SG), employers are required to pay 9.5 per cent superannuation for every employee who is aged over 18 and earning at least $450 per month.
“The implications are wider than the individual. Today’s retirement income policies are made on the assumption that, into the future, we’ll all have super. As pension access tightens and home ownership declines, those missing out on compulsory super stand little chance of a decent standard of living in retirement,” says David Whiteley, chief executive at Industry Super Australia.
Cbus chairman and former Victorian premier Steve Bracks added that many workers are only discovering their entitlements are being withheld – either in part or in full – when it is too late.
“We have stories of workers who’ve put faith in the system only to discover months later that their super, including extra voluntary contributions, has not been paid into their accounts and is lost completely when companies move into liquidation,” he says.
The ATO is actively cracking down on employers failing to meet their superannuation obligations. It told ABC News that in the 2015/16 financial year “we raised $670 million in SG [including penalties] from a range of ATO compliance review and audit activities. We raised 2,997 default assessments to employers as a result of reports from employees, totalling approximately $171 million in SG for the benefit of employees.”
Speaking to My Business, workplace lawyer Aron Neilson of Slater and Gordon says that he agrees the underpayment of superannuation contributions is a serious problem, with far-reaching implications for employees and also for business owners.
“I think the issue of underpayment of superannuation is a significant problem, and it's good that the report has actually come out and highlighted it,” he says.
“What happens is that when employees don't get paid their superannuation, they don't find out often until after they leave their employer, and then they make a complaint to the taxation office.”
According to Mr Neilson, the ATO has been swamped with complaints from concerned workers, which is slowing down its investigation times. Along with the report's authors, he is calling on the government to impose even stricter penalties on employers who fail to meet their obligations.
“The first step is obviously the tax office [gets] in touch with the employer and try and work out why the monies haven't been paid. If it hasn't been paid, then the tax office imposes a charge the equivalent of the amount of unpaid superannuation on the tax bill of the employer and then they charge an interest rate on top of that and an administration charge,” he explains.
“The penalties do need to be greater for non-payment of superannuation.”
Mr Neilson suggested that the underpayment of superannuation may be even more pronounced than the figures suggest, given that many employees are afraid to broach the subject with their employers for fear of losing their job. Yet he warns business owners against using this threat to cover their tracks.
“Where the situation can be different is if an employee is covered by an enterprise agreement that has a superannuation clause in it, because what that does is give the employee an independent right to enforce the non-payment of superannuation against the employer, and in so doing, they can seek a penalty under the Fair Work Act for the employer's contravention of that agreement.”
Additionally, workers who are sacked for voicing their concerns about underpayment also have just cause to launch unfair dismissal proceedings against their employer.
In a statement released in response to the revelations, Peter Koutsoukis, principal of law firm Maurice Blackburn, said it also highlighted potential flow-on effects, such as the ability for employees to access insurance benefits through their superannuation.
“Sadly, this is a scenario we see too often, where someone believes they have TPD insurance through their super, only to find out when it’s too late that their employer has not been paying the proper contributions, sometimes for a number of years,” Mr Koutsoukis said.
“This leaves people at a major disadvantage in seeking to access insurance they are entitled to, when they are already in a stressful situation dealing with a significant injury or illness.
“The findings of today’s report should serve as a wake-up call to all employers and government that not meeting your obligations when it comes to paying employees’ super contributions is unacceptable and cannot be allowed to continue.”