Employers delay paying super costs employees big

A little-known loophole that lets bosses hold on to superannuation contributions is costing employees more than $200 million a year.

Exclusive: Workers are losing more than $200 million a year to a little-known loophole that lets bosses hold on to superannuation contributions instead of paying them at the same time as wages.

About 70 per cent of Australians mistakenly believe their super contributions are paid into their retirement fund when they receive their pay — when in fact many employers hold on to an employees’ payments for up to four months, which they are legally allowed to do.

But new data crunched by the Industry Super Australia found a 20-year-old would lose up to $12,475 at retirement by being paid their super entitlements quarterly instead of fortnightly.

A massive $225 million worth of retirement returns was estimated to be lost in the 2015-16 financial year because of delayed payments for all employees aged 20 to 69.

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ISA’s chief executive Bernie Dean said workers were under the false impression that because superannuation contributions are shown on their pay slip their employer must have forwarded that amount to their retirement fund.

“At the moment there is no obligation on the employer to pay superannuation at the same time they pay wages,” Mr Dean said.

“If you put something on a pay slip employees are entitled to that money and it should be sent to their account.

“The vast majority of employees in Australia are on automated payroll systems and the payment of superannuation into a super account is as easy and streamlined as paying wages.”

Australians lose millions of dollars a year in interest returns because their super is paid quarterly and not when they are paid their salary.

ISA said about 50 per cent of Australians are paid their super entitlements quarterly, while the other half receive theirs more frequently than that.

Most funds pay returns daily on account balances.

ISA is urging for law changes to make employer pay super into the funds at the same time as wages are sent to bank accounts.

But Council of Small Business of Australia CEO Peter Strong said if employers were forced to do this they should be reimbursed for the added time it would take.

“This is extra work that we would have to do,” he said.

“If anybody says it’s easy and technology can do it, go and start a business.”

Financial adviser Scott Haywood said Australians zoned out over their super and only became interested when nearing retirement.

“People are generally complacent about super, they check their bank account daily and hardly ever check their super account,” he said.

“They would know when their super payment is made and wouldn’t have any idea where their money is invested.”

@sophieelsworth

Originally published as Employers delay paying super costs employees big