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Australian Retirement Savings Hit by Superannuation Shortfalls
Australians are facing a staggering $5.7 billion loss in retirement savings annually due to incorrect superannuation payments by employers, as revealed by recent analyses of data from the Australian Taxation Office (ATO). This significant shortfall has ignited a movement advocating for ‘payday super’ reforms as parliament reconvenes this month.
Superannuation Underpayment Crisis
The Super Members Council’s analysis indicates that roughly 3.3 million Australians missed out on their super entitlements in the 2022-2023 financial year, translating to an average loss of $1,730 per worker. This shortfall has worsened by $600 million compared to the previous year, signifying a concerning trend where employees collectively lose around $110 million every week.
The analysis highlights affected regions, with over one million workers in New South Wales underpaid by approximately $1,760. In Victoria, over 848,000 individuals experienced shortfalls averaging $1,670, while Queensland reported over 679,000 cases with losses averaging $1,720.
Need for Payday Super Reforms
To address the rampant issue of unpaid super, reforms are proposed that would require employers to make superannuation contributions concurrently with salary and wage payments, rather than adhering to the current quarterly payment schedule. This initiative, first flagged in May 2023, is set to come into effect from July next year but awaits government legislation.
Georgia Brumby, Deputy CEO of the Super Members Council, expressed concerns that delays in enacting this legislation would adversely affect future retirement savings for Australians. She emphasised the urgency of implementing these reforms, as timely contributions could enhance retirement funds significantly, providing nearly an additional $8,000 to the average retiree, thanks to the effects of compounding interest.
Calls for Legislative Postponement
Despite widespread support for the payday super reform, major accounting organisations, including CPA Australia, CA ANZ, and the Tax Institute, have requested a postponement of the proposed start date. They argue that the planned introduction in July 2026 is unrealistic and should be deferred by at least one year, if not two, due to the complexities involved in superannuation payments.
Enforcement and Compliance
Once legislated, employers will face a seven-day deadline from the time wages are paid to fulfil superannuation obligations. Failure to meet this requirement would result in liability for an updated super guarantee charge, which would encompass any shortfalls, accruing daily interest alongside an additional enforcement charge.
In a recent disclosure, the ATO found that its interventions resulted in $932 million of previously unpaid super being redirected into the retirement accounts of 797,000 employees over the last year. Notably, the ATO noted that 92% of super entitlements were paid without any need for intervention, which underscores the issue’s prevalence.
Employees are encouraged to verify their super payments via myGov and consult with their employers or super funds should they have concerns regarding unpaid contributions. For issues with unpaid super, Australians are directed to report these to the ATO directly.
Conclusion
With the looming reforms on superannuation payments, there is a pressing need for legislative action to secure the retirement savings of Australians. As the debate unfolds, the focus remains on ensuring employers adhere to their superannuation obligations, thereby guaranteeing that workers receive their entitled savings in full and on time. Individuals are urged to stay informed on their superannuation status to safeguard their financial futures.
