Industry Super Australia calls for crackdown on unpaid superannuation

The industry super lobby group, Industry Super Australia, is calling for a crackdown on unpaid super and the extension of mandatory super to gig workers.

ISA modelling shows a 30-year-old worker would be $8000 better off at retirement if they were paid superannuation fortnightly instead of quarterly.

The industry super lobby group, Industry Super Australia, is calling for a crackdown on unpaid super and the extension of mandatory super to gig workers in its pre-budget submission.

The ISA submission calls on the federal government to mandate that superannuation be paid with wages, not quarterly as it can be now, to reduce instances of unpaid and underpaid super.

ISA estimates there has been some $33bn in underpaid superannuation over the past seven years, an average of $4.7bn a year.

“Mandating more frequent super payments would end Australia’s multibillion unpaid super rip-off while potentially boosting investment returns for millions of workers who get all their legal entitlements,” ISA says in its submission.

“Because superannuation can legally be paid quarterly, there can be a misalignment between the super published on a pay slip and the amount deposited in the account. Some bosses exploit the misalignment to hide underpayments from their staff, dudding their workers and gaining an unfair advantage over competitors in the process.”

The submission says some employers use superannuation to manage their cash flow and accumulate large unpaid super liabilities.

ISA modelling shows a 30-year-old worker would be $8000 better off at retirement if they were paid superannuation fortnightly instead of quarterly, because their contributions would be compounded for longer.

The submission argues the superannuation guarantee system should be extended to “gig” workers and contractors.

It says younger workers and those on lower incomes are more likely to be underpaid on super.

ISA also says the unpaid super problem needs to be addressed by increasing the compliance activities of the ATO, allowing other bodies to help workers recovering underpaid super, including super in the National Employment Standards, and extending the Fair Entitlements Guarantee to cover super in insolvency.

The submission argues the superannuation guarantee system should be extended to “gig” workers and contractors. At the moment it is only applicable to employees.

“Despite having a world-class retirement saving system, some workers including those in the gig economy are not sharing the benefit because they are not entitled to receive the super guarantee,” it says. “This has a profound impact on how much money a worker has in private savings when they retire, which affects whether they can achieve a dignified retirement and the extent to which they need to rely on the age pension.”

ISA says it welcomes the government’s move to give the Fair Work Commission expanded powers to set minimum pay and conditions for gig workers.

The submission says the government needs to protect the fundamentals of the system by maintaining the legislated rise in the super guarantee – from 10.5 per cent to 12 per cent by July 2025 – and pass legislation setting down the purpose of super, mandating that it can only be used for retirement income.

“The government’s commitment to legislate an objective of super should enshrine in law the community notion that super is savings to be solely used in retirement,” it says.

ISA is also calling on the federal government to extend the period for performance comparison for super funds under the Your Future, Your Super system from the current eight years to 10 years.

 

It says the YFYS system needs to be improved by including all fees in any performance test comparison and needs to be extended to all funds, not just the current MySuper default products.

The government is reviewing the YFYS comparative performance regime following complaints by the sector about some aspects of its operation.

The ISA submission also calls for the payment of super on the Commonwealth Paid Parental Leave scheme and an increase in the Low-Income Superannuation Tax Offset to take into account changes to tax brackets and the increases in the super guarantee.

“Each year millions of Australians are missing out on billions in super that they earned, which is a crushing blow for them and their future,” it says.

“By not mandating employers pay super with wages, our federal politicians are turning a blind eye to a huge rip-off and undermining the future economic security of many young women and others on low incomes.

“Aligning the payment of super and wages is the right thing to do by workers, boosts government revenues, lifts investment returns and puts all employers on a level playing field.

“Super has been a boon for millions already, but it’s not perfect and there are longstanding issues that the government needs to address to make sure that more women, gig workers and low income earners get fairer go.”