While claims that up to 30 per cent of workers may be missing out on compulsory employer super contributions (currently 9.5 per cent of wages) may be far too high, there are undoubtedly deficiencies in the current arrangements. The problems stem from a lack of attention paid more than 30 years ago to details to ensure that employers meet their obligations and do not take advantage of any opportunities such as hiring contractors and black economy transactions to avoid their liabilities.
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Assigning the task of ensuring compliance to the Tax Office without accompanying strict pay as you go requirements has inevitably resulted in lengthy delays and protracted investigations to recover unpaid money. The system places the onus on individual workers to ensure they receive their compulsory super and then initiate Tax Office recovery action.
For the individuals concerned, pursuing their claims with their employers particularly involving small and even middle-sized businesses with cash-flow problems can be a daunting prospect, possibly putting the employees' jobs at risk. Adding to the problems with compulsory super is the fact that, regrettably, many younger and even middle-aged workers pay little attention to their superannuation.
When compulsory super was introduced, workers could cash out their super at any age when they changed jobs. Since 1999, all new super contributions are untouchable until age 65 or retirement after a compulsory preservation age of 60 for most people. Obtaining compulsory super takes a back seat behind the essential needs of receiving take-home pay and retaining a job.
Being forced to receive compulsory super instead of additional wages also adds to the problems of achieving home ownership. Reaching retirement age without home ownership and only superannuation to fall back on is unlikely to fund a comfortable retirement.
Until policymakers act to increase the attractions of compulsory super, for example, by allowing access to help with a home deposit, the incentive for workers to ensure their employers meet their obligations will not improve greatly. Indeed, as long as the self-employed, including many contractors, are not covered by compulsory super, there will continue to be a financial benefit from being self-employed.
The large majority of employers who comply with the compulsory super laws notify their employees when their payments are made. Fortunately, electronic access to super accounts makes it easy to check whether the payments have been received. The prudent approach is always to keep a close eye on, and a regular interest in, what is happening in the super fund.
Amongt other things, missed payments can be a warning signal of potential problems ahead and early action to remedy the situation may be more successful than delayed efforts to do so.
Daryl Dixon is executive chairman of Dixon Advisory. comments@dixon.com.au
- Have you had trouble with an employer not paying your compulsory super? Email the editor at caitlin.fitzsimmons@fairfaxmedia.com.au or leave a message in the comments.
