Employers not paying super to face court under Labor plan, as ATO urged to come down harder

small business tax budget

Employers that dodge superannuation obligations could be taken to court under Labor’s new plan to get super into the National Employment Standards, while the Australian Tax Office (ATO) has been urged to take a more heavy-handed approach to compliance.

Under Labor’s proposal, the ATO would also be required to meet a quota for unpaid super recovery, and report the transparent figure to Parliament annually.

As it stands, workers who are not employed under an enterprise agreement or the national workplace relations system are required to chase up unpaid super through the tax office, although it takes an average of eight months and there is no guarantee all funds can be recovered.

A staggering $5 billion in unpaid superannuation was lost in the financial year of 2018-2019, according to an analysis from Industry Super, which suggests a quarter of workers were affected to the tune of $1,700 on average a year.

Shadow Minister for Superannuation Stephen Jones told the Association of Superannuation Funds of Australia (ASFA) conference this week that there are too many obstacles to chasing up unpaid super, which can deter workers.

A Labor government would seek to include super in the National Employment Standards, alongside sick pay and annual leave, in a similar proposal put forth by then-Labor leader Bill Shorten in 2018.

But Financial Services Minister Jane Hume poured water on the idea, saying the proposal is superfluous in the context of other recovery methods.

“There are already multiple mechanisms for the recovery of unpaid superannuation guarantees, including recovery by the ATO, or recovery by employees or their representatives through the courts under superannuation clauses included in awards or enterprise bargaining agreements, as is already allowed under the Fair Work Act,” she said.

“While all employees can rely upon the ATO to enforce unpaid superannuation guarantees, for some workers this is the only means of recovering unpaid superannuation guarantees as the Fair Work Act does not cover all employees.”

ATO urged to increase do more to recoup unpaid super

It comes as the latest auditor-general’s report urged the ATO to take a more heavy-handed approach to recouping lost superannuation, having found the tax office takes a “low-touch nudge” approach that has seen only 15% of unpaid super collected a year.

The Addressing Superannuation Guarantee Non-Compliance report continued that the ATO had pledged to pursue 40% of non-compliance cases to 2020-21, but had fallen short of this target after the super guarantee taskforce was introduced in 2017.

The ATO is owed $2.9 billion in tax charged to employers that didn’t pay super, however, 95% of super payments are made without issue, the report noted.

The tax office was also urged to implement a comprehensive compliance strategy, with the report concluding the “ATO’s activities in addressing superannuation guarantee non-compliance are partly effective”.

The tax office agreed to all three recommendations in the report, saying it notes “that we will explore opportunities to enhance our performance measures and commentary on [super guarantee] performance information”.

Jones said lost super has a big effect on the retirement of Australian workers because of the nature of compound interest over time.

“Every dollar of unpaid super is a dollar that a retiree is not getting,” he continued.

“The Morrison government knows about it but they just don’t care. Labor plans to take the issue head-on.”

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