Business leaders call for simplified superannuation rules after SMEs accused of using employees’ super to improve cashflow


Business leaders are calling for a simplification of super paying processes after small businesses were accused of using unpaid super as additional cashflow.

The chief executive of superannuation services provider Industry Fund Services (IFS) Cath Bowtell told The New Daily this week SMEs are borrowing employees’ super without their knowledge and using it to cover issues with cashflow.

“These businesses are effectively borrowing that money without the employee knowing, they’re an unwilling and unknowledgeable creditor,” Bowtell told The New Daily.

IFS collects super on behalf of multiple industry funds, and Bowtell claims out of the 192,000 employers who were behind on super payments contacted in 2015-16, 29,000 of them made payments after a reminder phone call.

She believes few businesses are “truly at risk” of insolvency, and are instead using employees super to solve cashflow issues.

However, Peter Strong, chief executive of the Council of Small Business of Australia (COSBOA), believes the way to remove temptation for SMEs to dip into employees’ super to patch up cashflow is to put super in the hands of the tax office.

“We want to take it out of the hands of SMEs and put it in with PAYG. If we did that, [Bowtell’s comments] would be irrelevant,” Strong told SmartCompany.

“Its a very complicated system, so don’t ask SMEs to do it.”

But speaking to SmartCompany this morning, Bowtell said the argument for putting super in the hands of the Australian Taxation Office has been delegitimised with the introduction of government-supported clearing houses.

“With the advent of government supported clearing houses, I don’t think that argument has the same force,” she says.

Strong admits there will always be groups of employers doing the wrong thing, but argues a large group are just confused by the process. Strong is also critical of super funds, accusing them of “scamming” SMEs.

“Super funds have been appalling. They lose info constantly, and they threaten employers with legal action,” he says.

“If you add super complexity, funds who are incapable of good administration, and employers who struggle with management, its a recipe for confusion.”

Bowtell says no employers would receive a legal letter from super funds her business manages without multiple phone calls, which “remind and educate” businesses of their obligations.

“In my view this is not a heavy-handed approach,” she says.

“All our offices strive to educate businesses on their obligations, along with tax and employment law.”

Recently, industry groups and super experts pushed to remove the $450 monthly threshold for employer super payments, a suggestion business groups were hesitant to support amid concerns businesses may roster staff less often to account for additional super payments.

“Thats another 10%, [if someone earns $450] thats $45 you have to plan for,” Strong told SmartCompany at the time.

“$45, well, someone will say its not enough much money, but it is.”

Cashflow issues stem from long payment times

Small business ombudsman Kate Carnell believes SMEs using super to bolster cashflow is a symptom of a greater issue that stems from slow payment times.

“We’re seeing big business and government instrumentalities are paying SMEs slower and slower, and what that produces is a cashflow problem,” Carnell tells SmartCompany.

“They have to pay staff, pay landlords, and when payment times start blowing out, the areas where small businesses can manage cashflow is with the ATO and super.”

“It’s not right, and employers shouldn’t do it, but they’ve got a cashflow problem because they’re not getting paid.”

Carnell supports Strong’s suggestion for the ATO to handle employees’ superannuation, believing it would make things simpler for SMEs if tax and super were paid in one go.

“Rather than SMEs having to do administrative stuff on the behalf of super funds, make it so employers can pay tax and super in one go, then the ATO can pay the relevant super funds,” she says.

“The easier we make it the more likely businesses are to be compliant.”

Never miss a story: sign up to SmartCompany’s free daily newsletter and find our best stories on TwitterFacebookLinkedIn and Instagram.


Notify of
Newest Most Voted
Inline Feedbacks
View all comments
5 years ago

The Industry Funds Sector has been on a campaign to collect Super fortnightly, or preferably even before the employee is paid in order to get their cut faster. Quarterly is a reasonable balance. Most small business that are deemed “at risk” would not have much in Super to pay out anyway, this is just scare mongering by Industry Funds who really want to hit bigger employers faster.

5 years ago

Employers are not the problem

Confusion caused by Superfunds is a bigger contributor to the non payment of super than any other factor.

Businesses plan their cashflow. They plan to meet their obligations as and when they are due. They therefore plan to pay the amount of Super that has been accrued over a quarter by the date the Australian Law requires them to pay it, typically the 28th of the next month. They plan to pay their suppliers according to a schedule and they plan to pay their staff on pay day. It is not fair nor reasonable to state “employers are using employees super to improve cashflow”. They are not due to pay it! They dont leave the money sitting in a bank account doing nothing when they could be generating more business and creating more economic activity! It is NOT the employees money until it is due to be paid to the super. SuperGuarantee system was not created in a vacuum and was created with a payment system that the economy agreed to. Why do some (read superfunds) suggest that this system was so wrong.

Employers have now factored in that employment has a Super Guarantee obligation in addition to wage and all other on costs. They have factored in the cashflow impact. It is our position that you should leave this alone!

Employers stop complying or following a system when the system is so complicated it is overwhelming. SuperStream should have been a logical systemised process and easy for employers to adopt. Those that use a superstream gateway, preferably incorporated into their software, have a simple system and it is easy.

The complication starts when SuperFunds start demanding monthly payment, when they start demanding Nil remittance advices, when they engage legal firms to send threatening debt letters requiring payment of Aprils accrued super on or before the 1st May (Yes we have samples of the large Industry funds making this demand).

Employers are not the Super Problem. SuperFunds with unreasonable if not illegal requests are the problem.

Single Touch Payroll

The soon to be implemented Single Touch Payroll has in its design two factors that will help any perceived “employer” problem with managing their Super Guarantee obligations. Each payevent will report the amount of Super Guarantee obligation that has been accrued for each employee so far for the payroll year. In this way the ATO will finally have visibility of whether an employer is accruing super and eventually be able to clarify whether they should be accruing super. The second factor is the reporting of the actual payment of the super by the employer. The design of this reporting is still in discussion. The aim is the ATO will now have visibility of whether the employer is paying their super and will then follow up those employers that arent. In theory problem solved. In practice problem at least managed.

One of the design models being discussed, made public at the recent Single Touch Payroll and Super Industry Engagement Forum, is that the SuperFunds themselves will report the receipt of payment for each employee back to the ATO. On one hand this achieves the purpose – visibility of payments to the ATO. On the other hand this places the funds in an interesting position. In our view it CANNOT and MUST NOT empower the superfunds to put even more pressure on the Employers to pay earlier or in any different cycle or manner than is the current legal obligations (once per quarter unless awards or employment agreements state otherwise).

We do not accept that superfunds can bury clauses about earlier or more regular payments into Product Disclosure Statements or similar and then use that same fine print to then threaten the employers.

Call Out

Superfunds, get on board with SuperStream gateways as your only means of receiving Super Payments. This is simple for employers and employers will be somewhat more content with keeping it Simple.

SmartCompany Plus

Sign in

To connect a sign in method the email must match the one on your SmartCompany Plus account.
Or use your email
Forgot your password?

Want some assistance?

Contact us on: or call the hotline: +61 (03) 8623 9900.