Australians Owed Billions in Superannuation Guarantee

Australian workers are owed a mammoth amount in employer superannuation guarantee—but things are about to change.

$3.6 billion. 

That’s the amount workers are owed in employer superannuation guarantee (SG), according to Australian Taxation Office (ATO) estimates. 

And business owners should take note—it’s a figure that the federal government is aiming to significantly reduce. 

Not that the vast majority of employers have anything to worry about.

SG compliance rates are considerably high, with data showing that more than 94% of super—or upwards of $71 billion—was collected without regulator intervention in 2020-21.

Moreover, the net gap in SG has reduced in recent years—down from 5.7% in 2015-16 to 5.1% in 2020-21.

But these positives cannot hide the fact that a figure of 5.1% equates to a $3.6 billion net gap in payments that should be appearing in employees’ super funds. 

Within that net gap is roughly $1.8 billion of payments from hidden wages—the likes of under-the-table cash payments, undisclosed wages, and non-payment of super where workers are misclassified as contractors: more on that below.

Also, the ATO has noted that as at February 28 2022, $1.1 billion of SG charge debt was subject to insolvency—and unlikely to be recoverable. 

All that aside, the government still has an issue of significant SG underpayments on its hands.

None of this is helped by the process of quarterly reporting, where debt can escalate considerably before the ATO has the opportunity to identify it and pounce on the problem.

But the peak tax body has a couple of aces up its sleeve…

ATO Matching STP Data

Most of us would be aware of Single Touch Payroll (STP), the government-led platform that employers must use to report payments to workers.

The beauty of STP is it provides the ATO with an extensive, granular level of data relating to income paid to employees. 

Now, the ATO is matching STP data to the information provided to them by super funds in the hope of identifying employers’ late payments of quarterly SG and under or incorrect reporting.

It’s worth noting that SG laws are incredibly black and white. 

Contributions either meet the deadline or they don’t—there is no leeway. 

Late payments are of increasing concern to the ATO and the government, despite the penalties that apply to employees who miss deadlines. Among them is a 10% per annum interest levy on SG owing for the quarter, coupled with administration fees. 

In a worst case scenario, where an SG charge amount remains outstanding, a company director may be personally liable for a penalty.

Be Wary of Misclassifying Contractors

A common mistake made by business owners is making an assumption that hiring independent contractors means they will not be responsible for PAYG withholding, SG, payroll tax, and workers’ compensation obligations. 

However, in some cases, genuine contractors can be treated as if they were employees—and employers face stiff penalties if they make the wrong assumption.

The ATO provides a clear outline of the difference between employees and contractors.

Proposed Changes to Paying Super

Another plus for the ATO’s cause relates to a proposed change to the frequency of SG payments.

As we revealed earlier this year, the government is planning a major shakeup to the way in which employers pay their workers’ super.

If legislation is passed, employers will be required to pay their employees’ super at the same time as their salary and wages—with a proposed starting date of July 1 2026. 

The government believes the move will decrease the odds of SG liability building up due to employers’ missed deadlines. 

The reform is also tipped to improve retirement incomes of millions of Australians to the tune of an estimated 1.5%. 

How Does All This Impact You?

There’s a lot for employers to be on top of—and often minimal wiggle room if you get it wrong.

If you have questions about any of the information in this article or have other business-related financial queries that you’d like to discuss, reach out to us to chat.