Unpaid super the underbelly of business

There are two types of unpaid superannuation — the worst kind and the nasty kind.

George Calombaris’s underpaying of staff has highlighted the issue. Pic: AAP

MasterChef celebrity George Calombaris has once again highlighted the underpayment of workers with a decision to fast-forward compensation to staff in his chain of restaurants.

Calombaris’s embarrassment coincides with the latest political effort to solve the problem of workers not being paid superannuation.

Introducing a set of reform proposals earlier this week, the Nick Xenophon Team claimed unpaid super is currently running at $3.6 billion and will blow out to a staggering $66 billion by 2024.

Unfortunately, the NXT is basing its numbers on estimates that originated with the union-backed Industry Super Australia group. These estimates have already been questioned by no less an authority than the Australian Taxation Office, which branded them “unreliable”.

Yet even allowing for any exaggeration of the problem, in a strong system unpaid super should simply never occur.

Exploiting superannuation entitlements represents the underbelly of business. Except in cases of insolvency, it is rarely excusable.

There are two types of unpaid super — the worst kind, which is not paying the so-called SGC (superannuation guarantee contribution, which works out at 9.5 per cent of salary) and the nasty kind, which is not treating salary sacrifice contributions in a fair manner.

Among the NXT’s key proposals are some good ideas and some “no-hopers”.

The NXT aims:

1. To offer a direct legal avenue to individuals to push their case. This would be very welcome. Currently all cases of unpaid super must be taken up by the ATO and pushed through the system by the ATO. This is not ideal. Certainly, a new legal avenue for individuals to securely identify employers who are not doing the right thing would be a step in the right direction.

2. To create a more effective way of tracking whether contributions are being made. This is going to be very difficult to introduce. Employers do not have to pay contributions until 28 days after the end of each tax quarter. No doubt many people jump the gun in the waiting period, which may seem like a long time for a salary earner.

3. To remove the “salary sacrifice loophole”. Put simply, if you salary sacrifice under current rules an employer need not pay you the complete SGC of 9.5 per cent of your salary. Rather, the employer can deduct the salary sacrifice amount and then pay 9.5 per cent of the residual amount due. This loophole should be closed, though it should be noted that since July 1 the loophole got a lot smaller because employees now can make a contribution to your super account and then claim a tax deduction up to the new maximum of $25,000 per annum.

4. The NXT is seeking to remove an exemption where employees paid less than $450 a month are not to be paid super contributions. At face value it is surely impractical to bring this dollar barrier any lower — it would be an administrative nightmare. But it could lend itself to a fix similar to the recent salary sacrifice fix where tax deductions become available to the individual.