As speculation mounts that super tax breaks will be cut, one industry super fund has found the government has lost more than $1 billion in tax due to the non-payment of superannuation guarantee contributions.
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.”
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