Each year employers pocket billions which should have gone into their workers' super funds. Payday super reform will not arrive until 2026.If you retired recently, you may have been the victim of it. If you are still working, likewise. The chance you’re the victim of wage theft is one-in-five.
And it’s not just CPSA who is calling it that. It’s the federal Treasury and when the federal Treasury starts talking about “wage-theft” when referring to unpaid superannuation contributions for working people, you know there is a serious problem.
You would expect some nice bureaucratic description like ‘superannuation guarantee payment delinquency’: a term like “wage-theft” out of Langton Crescent is unheard of.
Super wage theft
Employers have to pay 11 per cent of every employee’s wage or salary into the employee’s superannuation fund. That 11 per cent is compulsory employer contributions. They are also known as the Superannuation Guarantee. It’s part of the employee’s wage or salary.
For years, the overall gap between what employees were actually paid in superannuation and what they should have been paid has been around 5 per cent, or $3.5 billion a year.
Even the Treasury had to call a spade a spade: “Non-payment and underpayment of SG contributions is equivalent to wage theft and has significant impacts on retirement outcomes …”
What’s being done about wage theft from super?
If the problem is that big, the obvious question is: why isn’t anything being done about it?
Right now, the Australian Tax Office, which is supposed to police superannuation contributions, is working with last century’s tools to make employers comply.
The ATO relies heavily on employees to notify it of real or suspected non-payment of super contributions by employers. The ATO will investigate where an Employee Notification is lodged and take action where needed. An obvious problem is that as an employee you have to be pretty alert and knowledgeable about super to pick up under- or non-payment.
Employers are required to issue payslips to their employees, and these must include the superannuation contributions that an employer is required to make for the pay period covered by the payslip. But that doesn’t necessarily mean contributions have been paid into the super fund. To check, an employee then has to reconcile their payslips with their super fund statements.
Generally, super contributions for an entire quarter must be paid into the employee’s superannuation fund on or before the 28th day of the month after the end of a quarter. Obviously, the delay between payment of wages and superannuation can make it difficult for employees and the ATO to identify underpayment of SG in a timely manner.
The ATO also does what it calls “some proactive compliance”, being manual (!) data matching of employer and superannuation fund reporting, focussing on high-risk employers.
In 2020-21, the ATO undertook 19,600 reviews of employers. Of these, 16,400 were triggered by an Employee Notification (21,000 of these were lodged). The rest (3,200) were initiated by the ATO and took the form of manual (!) wage and super fund data checks.
Meanwhile, each year the multi-billion-dollar wage-theft continued and continues.
As a direct result of the way the super contributions system is set up, many SG obligations remain unpaid for extended periods of time. Sometimes businesses go bust without having paid their SG obligations. As at 28 February 2022, $1.1 billion of unpaid superannuation contributions was subject to business insolvency, unlikely to ever be recovered.
The solution: payday super
It’s not rocket science to work out the broad solutions to this problem. The federal Treasury proposes these solutions in a consultation paper, Securing Australians’ Superannuation. They involve (1) the payment of super contributions into employees’ super funds on the day their wages or salaries are paid (“payday super”), and (2) the upgrading of computer systems to facilitate running reports which instantly identify under- or non-payments.
Sounds simple, but it requires new computer systems to be used by the ATO and by employers. It will take until 1 July 2026 – the better part of three years – until these solutions will have been implemented. Billions of dollars of “wage theft”, as even the Treasury calls it, will still be committed between now and then.
What is also not clear is whether in 2026 the ATO will pursue past wage theft or just wage theft occurring from 2026.
Also read:
Have super, am retired, now what?
If you retired recently, you may have been the victim of it. If you are still working, likewise. The chance you’re the victim of wage theft is one-in-five.
And it’s not just CPSA who is calling it that. It’s the federal Treasury and when the federal Treasury starts talking about “wage-theft” when referring to unpaid superannuation contributions for working people, you know there is a serious problem.
You would expect some nice bureaucratic description like ‘superannuation guarantee payment delinquency’: a term like “wage-theft” out of Langton Crescent is unheard of.
Super wage theft
Employers have to pay 11 per cent of every employee’s wage or salary into the employee’s superannuation fund. That 11 per cent is compulsory employer contributions. They are also known as the Superannuation Guarantee. It’s part of the employee’s wage or salary.
For years, the overall gap between what employees were actually paid in superannuation and what they should have been paid has been around 5 per cent, or $3.5 billion a year.
Even the Treasury had to call a spade a spade: “Non-payment and underpayment of SG contributions is equivalent to wage theft and has significant impacts on retirement outcomes …”
What’s being done about wage theft from super?
If the problem is that big, the obvious question is: why isn’t anything being done about it?
Right now, the Australian Tax Office, which is supposed to police superannuation contributions, is working with last century’s tools to make employers comply.
The ATO relies heavily on employees to notify it of real or suspected non-payment of super contributions by employers. The ATO will investigate where an Employee Notification is lodged and take action where needed. An obvious problem is that as an employee you have to be pretty alert and knowledgeable about super to pick up under- or non-payment.
Employers are required to issue payslips to their employees, and these must include the superannuation contributions that an employer is required to make for the pay period covered by the payslip. But that doesn’t necessarily mean contributions have been paid into the super fund. To check, an employee then has to reconcile their payslips with their super fund statements.
Generally, super contributions for an entire quarter must be paid into the employee’s superannuation fund on or before the 28th day of the month after the end of a quarter. Obviously, the delay between payment of wages and superannuation can make it difficult for employees and the ATO to identify underpayment of SG in a timely manner.
The ATO also does what it calls “some proactive compliance”, being manual (!) data matching of employer and superannuation fund reporting, focussing on high-risk employers.
In 2020-21, the ATO undertook 19,600 reviews of employers. Of these, 16,400 were triggered by an Employee Notification (21,000 of these were lodged). The rest (3,200) were initiated by the ATO and took the form of manual (!) wage and super fund data checks.
Meanwhile, each year the multi-billion-dollar wage-theft continued and continues.
As a direct result of the way the super contributions system is set up, many SG obligations remain unpaid for extended periods of time. Sometimes businesses go bust without having paid their SG obligations. As at 28 February 2022, $1.1 billion of unpaid superannuation contributions was subject to business insolvency, unlikely to ever be recovered.
The solution: payday super
It’s not rocket science to work out the broad solutions to this problem. The federal Treasury proposes these solutions in a consultation paper, Securing Australians’ Superannuation. They involve (1) the payment of super contributions into employees’ super funds on the day their wages or salaries are paid (“payday super”), and (2) the upgrading of computer systems to facilitate running reports which instantly identify under- or non-payments.
Sounds simple, but it requires new computer systems to be used by the ATO and by employers. It will take until 1 July 2026 – the better part of three years – until these solutions will have been implemented. Billions of dollars of “wage theft”, as even the Treasury calls it, will still be committed between now and then.
What is also not clear is whether in 2026 the ATO will pursue past wage theft or just wage theft occurring from 2026.
