The number of Australian workers short-changed by employers on superannuation contributions is rising, according to new research. Employees need to be more vigilant about checking that they are paid their entitlements.
Industry Super Australia estimates that the number of workers short-changed on super contributions has increased by 90,000 since the 2013/14 tax year to a total 2.8 million in the 2016/17. ISA estimates that about $5.9 billion of contributions has not been paid – $2000 for each person.
Young people and low-paid workers are particularly vulnerable. ISA estimates that close to half of young adults (under 35) earning under $30,000 a year are underpaid super.
The ISA’s research is based on tax office data, using anonymous sample data of personal income tax and superannuation records.
The report reveals that some employers are counting their employees’ salary sacrifice contributions as part of their super guarantee payments, thus reducing their guarantee entitlements. It estimates that 370,000 people are affected in this way.
They are using a loophole in the Super Guarantee Administration Act, which bases the super guarantee charge on the level of employer contributions irrespective of whether the contribution contains salary sacrifice amounts
Industry Super says part of the problems lies with workers who are not well informed about how super works. More than half polled in a UMR survey did not know what the arrangements were for payment of super by their employer.
Fund members should check their accounts regularly to ensure payments have been made. If they are in doubt, and they are in an industry fund, their fund may be able to take action through Industry Fund Service Unpaid Super, a debt recovery provider.
ISA points out that these underpayments or non-payments have a serious impact of super balances over time.
It has called for more government action to stop under-payment. “The number one policy to fix unpaid super is to require employers to pay super at the same time as wages and salary, rather than allow the money to be used for other purposes for up to four months,” it says.
For fund members wanting to track their super account, the Australian Securities and Investments Commission’s MoneySmart website has a checklist for super statements. It recommends that fund members check the following details:
- Personal details. Make sure address and contact details are correct.
- Does the balance look right. Consider your starting balance, employer contributions, investment returns and fees. If something doesn’t look right, contact the super fund and ask for an explanation.
- Employer payments. Make sure you have received all your employer contributions. Employers only have to transfer contributions quarterly but they have the option of paying more frequently.
- Personal contributions. If you have made personal contributions, either directly or through salary sacrifice, make sure the fund received them.
- Employer and salary sacrifice contributions are taxed at 15 per cent. Investment returns are taxed at a maximum of 15 per cent. If you have been taxed more than this, your super fund may not have your tax file number. Check with the fund and supply TFN is necessary.
MoneySmart also recommends that fund members review their life insurance details to make sure cover is appropriate.