The losses have accumulated over the past three years, according to Cbus, and the problem of non-payment is continuing to grow.
“This problem is getting bigger and is having an increasing impact on workers’ superannuation balances and on government revenues. Most contributions are taxed at 15 per cent which we estimate to be approximately $375 million per year in foregone tax revenue,” said Cbus chief executive David Atkin.
“For workers this impact continues with the loss of compounding interest on the unpaid super. Tria Investments estimate that an average 25-year-old impacted by non-compliance for five years loses 14 per cent of their retirement savings.
Mr Atkin said the tax revenue losses are a “double hit” to the federal Budget, with the government feeling the losses now and also when Australians retire with a lower-than-expected superannuation balance.
“If the government is addressing long-term Budget sustainability then this issue should be a priority for reform. There are some simple but effective steps the government could take,” Mr Atkin said.
“Firstly, investigate aligning payment of the superannuation guarantee with wages…This will reduce the risk of employers failing to contribute and ensure red flags go up early on employers who don’t intend to meet their obligations,” he said.
“Secondly the government should beef up regulatory enforcement and education. Stronger enforcement action will ultimately be the most effective deterrent. Either the ATO needs to be properly resourced to undertake this task or the regulation of the superannuation guarantee should fall to another body such as the Fair Work Ombudsman,” he added.
The ATO is this year targeting its education campaign at employers that have been identified as having a higher risk of not meeting their super obligations, including those in building and child care services, an ATO spokesperson told SMSF Adviser.
The ATO’s audit strategy will include a focus on clothing retailing, management advice and consulting.
“The ATO investigates every employee notification and we keep them informed of our progress for investigating and recovering any unpaid super amounts. We also initiate compliance action on high-risk employers that we identify ourselves,” the spokesperson said.
“Third-party referrals from intermediaries such as super funds, employee associations and tax professionals are also sources of information for our compliance actions, and each year we select several particularly high-risk industries to focus on. When the ATO recovers outstanding super amounts from employers, payments are then sent to the employee’s super fund.
“As a result of the ATO’s compliance activities, in 2013/2014, 149,458 employees had superannuation entitlements raised and 284,200 employees had superannuation entitlements raised through employer voluntary disclosures, resulting in $843.9 million in superannuation guarantee charge raised.”
@ Responsible – like Wildcat, I agree with the sentiment. However, it seems like many low(er) income earners, the uneducated, etc would have issue making these payments and therefore undermine the whole notion of “forced saving for retirement”.
How about the ATO tax tables be updated to include SGC, and one PAYGW amount remitted by the employer. When the employer lodged the PAYG Summary, it determines the total SGC which was remitted for that employee. When the individual lodges their tax return the remitted SGC + a nominal interest rate is transferred from the ATO to the nominated super fund (perhaps an additional tax return label).
Easier for small business (one ATO payment per month/quarter, not an ATO payment and several super payments), better for the individual (ensures that it’s paid, and they can see how much was contributed by looking at their NOA) and traceable by the ATO (notified in BAS/IAS, simple calculation to see if ~9.5% of W1).
Usual myopic comment from those with insufficient understanding. SGL paid is a tax deduction for the employer, so if unpaid the 15% contributions tax revenue will be offset by additional personal tax for unincorporated entities or company tax for incorporated entities based upon additional profit equal to the unpaid SGL. In fact govt revenue probably higher due to higher tax rate on employer profits.
Responsible, not sure I agree with your implementation method but I agree with the sentiment.
There is way too much nanny state (it’s someone else’s fault even though I abdicated personal responsibility) in this country.
There should be compulsory employee contributions as well as employer. Perhaps more interest would be taken by the vast majority that take no responsibility for their own welfare.
Take the responsibility away from employers and make the individual responsible for contributing to their own super. The compliance complexity and responsibility that employers are burdened with and the penalties they face will be eliminated (free up the small business person’s time! Aren’t they the backbone of this country?!?). The difficulty of ATO auditing is also made simpler with the individual making stat dec that they have made contribution of $X on their individual income tax return which ATO computer system will check equals Y%. Simple, a computer generated audit letter is despatched if shortfall to which the individual must respond! The individual is then responsible for their own actions or rather lack of action and incur the penalties imposed for non-compliance as well as loss of super earnings.
The ATO is at least 12 months behind in investigating non payment of Super guarantee employer payments. This is a disgrace and encourages non compliance.
Under sourced ATO is unacceptable!