Tax Office failed to collect billions in superannuation

The Australian Tax Office has failed to collect billions in unpaid superannuation each year, with a damning audit finding the reactive approach is costing workers whose bosses are breaking the law.

Instead of proactively hunting down employers who fail to pay super, the ATO is using a “low-touch nudge” approach, which has meant less than 15 per cent of unpaid superannuation is collected annually.

The audit office found the ATO was only partially effective in its efforts to recoup lost superannuation and encourage employers to pay super.Credit: Gabriele Charotte

A report from the Australian National Audit Office calculated the ATO was owed $2.9 billion in tax charged to employers that failed to pay superannuation, while the industry estimates the shortfall is as high as $5 billion a year.

About 95 per cent of super contributions are paid without the Tax Office intervening. But employers that don’t comply have a big impact on the retirement incomes of Australians.

The audit office report into that non-compliance found the ATO was only partially effective in its efforts to recoup lost superannuation and encourage employers to pay super.

It said the Tax Office had made a commitment to be proactive in 40 per cent of compliance cases in the three or four years to 2020-21.

Instead, the report found proactive compliance activities declined after the super guarantee taskforce was introduced in 2017, with a shift “from resource-intensive audit activity to low-touch nudges”.

Between 2013-14 and 2018-19, the audit report found the Tax Office’s compliance activities in detecting and collecting unpaid super amounted to less than 15 per cent per year of the estimated amount of unpaid super.

The audit office said enforcement pauses during the bushfires and coronavirus pandemic meant the Tax Office was only partially effective in using its debt recovery powers. Stronger enforcement powers “have largely not been exercised”, and firm compliance activity was used less frequently.

In a speech before the release of the report, Labor’s superannuation spokesman, Stephen Jones, said Australians were losing billions of dollars a year in unpaid super.

‘Every dollar of unpaid super is a dollar that a retiree is not getting.’

Labor’s superannuation spokesman, Stephen Jones

“Every dollar of unpaid super is a dollar that a retiree is not getting,” he said. “The Morrison government knows about it but they just don’t care. Labor plans to take the issue head-on.”

Jones said Labor would require the Tax Office to set tough and transparent targets to recover unpaid superannuation, and require those results to be reported to parliament annually.

Superannuation Minister Jane Hume said the Coalition takes superannuation guarantee compliance seriously.

“I note the ATO has agreed with the recommendations of the report, and will continue to prioritise a preventative approach to SG compliance,” she said.

Setting targets was one of three recommendations from the audit report. The Tax Office agreed to all three, which included making more use of its enforcement powers, but with qualifications on setting targets.

“[We] note that we will explore opportunities to enhance our performance measures and commentary on [super guarantee] performance information,” the ATO said in response.

Industry Super Australia chief executive Bernie Dean said the Tax Office needed to do better.

“It is little wonder the regulator performs so badly considering the auditor-general’s finding that the ATO does little proactive enforcement, instead relying on workers to make a report and do all the heavy lifting,” he said.

ACTU assistant secretary Scott Connolly said recovering less than 15 per cent of unpaid super was an “appalling record” that would leave millions of workers worse off in retirement.

“Australian workers are losing $5 billion per year through a system which allocates 13 full-time staff to the proactive policing of the theft of super nationally,” Connolly said.

Dean said Labor’s commitment to strengthen Tax Office compliance was a step in the right direction, but the next big step was to require employers to pay super at the same time as workers’ wages rather than four times a year as currently required.

Cut through the noise of the federal election campaign with news, views and expert analysis from Jacqueline Maley. Sign up to our Australia Votes 2022 newsletter here.