Why super non-compliance is a serious issue for Australian employers.
Compulsory employer superannuation contributions are nothing new. They were actually introduced by the Keating Government way back in 1992, yet many employers continue to fall short of their super obligations each year, often unknowingly. Could you be one of them?
The Federal Government has been concerned about the impact of super non-compliance for some time, with the ATO estimating the shortfall between what employers should be paying their employees in super and what is actually paid, currently runs well into the billions of dollars each year. It’s a position backed up by separate research conducted by Industry Super Australia.
The super spotlight intensifies
The size of Australia’s ‘super shortfall’ came into sharp focus following the release of an often-damning 2017 report into Superannuation Guarantee Non-compliance, prepared for the Minister for Revenue and Financial Services. Coupled with several high-profile cases of employees being underpaid in the media – including businesses owned by Masterchef host, George Calombaris, the (now defunct) food delivery operator Foodora and retail cosmetics chain Lush which admitted to $2 million of underpayments affecting more than 5,000 of its staff – there onus has never been stronger on employers to get it right.
Increased policing and penalties
The ATO has been quite vocal of its intent to step up policing of employers to ensure proper super compliance, while employees are also increasingly raising their concerns directly with the Fair Work Ombudsman, with more and more cases ending up in court. Penalties for non-compliance can be severe too, including heavy fines and even 12-month jail terms for directors found guilty of breaches. This means it’s essential to understand – and meet – your employer super obligations. As the saying goes, ignorance is no excuse.
Whilst it’s yet to pass through the Senate, it’s worth noting moves are currently afoot in Canberra to provide a 12-month Superannuation Guarantee Amnesty. This would provide a one-off opportunity for Australian employers to correct any past super guarantee shortfalls without penalty. As an added incentive, catch-up payments made during the amnesty period will also be tax deductible. You can find out more on the ATO website.
How to correct an underpayment
Underpayments can happen for all manner of reasons. But regardless of why, if any of your employees haven’t received their correct super entitlements, it’s in your best interests to rectify the situation as soon as possible. To help you do this, the Fair Work Ombudsman provides a step-by-step guide on how to do it here.
Some key things to remember
Compulsory employer contributions are currently 9.5% of employee earnings
Employers are legally required to pay superannuation to every employee over the age of 18 earning more than $450 gross a month
Superannuation is required to be paid within 28 days of the end of each quarter
It doesn’t matter if an employee works casual, part-time or full-time hours – they’re still entitled to super
Contractors may also be eligible for super, so be sure to check
Small businesses account for around 70% of reported superannuation guarantee non-compliance with cash flow problems often cited as the major reason.