The most recent estimates from the Australian Taxation Office reveal that workers are owed a staggering $3.6 billion in superannuation guarantee (SG). This concerning figure has caught the attention of both the government and regulators, prompting a push for significant changes.

On the surface, SG compliance statistics for employers seem commendable, with over 94% of the expected $71 billion collected in 2020-21 without regulatory intervention. The net gap in SG has narrowed from 5.7% in 2015-16 to 5.1% in 2020-21, partly influenced by COVID-19 stimulus measures that boosted voluntary contributions, especially in 2019-20.

Despite these positive trends, the 5.1% gap equates to the substantial sum of $3.6 billion in unpaid superannuation funds earmarked for workers. Within this total, $1.8 billion is attributed to hidden wages, encompassing off-the-books cash payments, undisclosed wages, and situations where employees are misclassified as contractors.

As of February 28, 2022, $1.1 billion of SG charge debt faces insolvency, posing a significant challenge to recovery. The ATO notes that quarterly reporting allows debt to escalate before identification and intervention, emphasizing the need for more proactive measures.

Employers should not anticipate traditional government-led compliance programs to address SG underpayments. Instead, technological advancements and legislative changes are set to play a pivotal role in rectifying the issue.

Single touch payroll matching with super fund data

The integration of Single Touch Payroll (STP) with super fund data is a key mechanism for regulators. STP, the mandatory reporting system for employer payments, offers real-time data to regulators, facilitating the identification of late payments and incorrect reporting. The ATO is actively matching STP data with superannuation fund information to enhance accuracy.

Late payments of quarterly SG contributions have emerged as a growing concern. Some employers miss payment deadlines due to cash flow difficulties or technical issues with contribution timing. The stringent nature of SG laws means contributions must reach the employee’s fund before the due date, with no tolerance for delays.

Employers failing to meet SG deadlines face the Superannuation Guarantee Charge (SGC), which includes the SG owing, 10% interest per annum, and an administration fee of $20 per employee with a shortfall per quarter. Unlike regular SG contributions, SGC amounts are not tax-deductible.

Penalties up to 10 years in prison for ‘wage theft’ on purpose

Legislation currently under debate in Parliament aims to criminalize intentional “wage theft,” introducing fines three times the underpayment amount. The reforms also address casual employment definitions, sham contracting tests, and enhance the Fair Work Commission’s powers.

The proposal for “payday” super, slated for implementation from July 1, 2026, aims to align SG payments with employee salary and wage payments, reducing the opportunity for SG liabilities to accumulate. The consultation paper outlines two options for payment timing, with interest accruing on late payments from the payday.

As the situation evolves, more details on “payday” super will be provided. In the meantime, employers are urged to stay informed and adapt to the changing landscape of superannuation compliance.