Australians Missing Out on $5.7 Billion in Retirement Savings Due to Superannuation Underpayment
Research based on Australian Taxation Office (ATO) data highlights a shocking $5.7 billion loss in retirement savings annually for Australians. This figure stems from employers failing to accurately pay superannuation entitlements, prompting urgent calls for reform known as ‘payday super.’
In the 2022-2023 financial year, approximately 3.3 million Australians were affected by superannuation underpayments, with individuals missing out on an average of $1,730. This amount reflects a significant increase, up $600 million compared to the prior year, with workers losing around $110 million weekly due to unpaid super.
Underpayment Statistics by State
- New South Wales: Over 1 million workers missed out on an average of $1,760 each.
- Victoria: Approximately 848,000 individuals were underpaid, with an average loss of $1,670.
- Queensland: More than 679,000 workers missed an average of $1,720.
What is ‘Payday Super’?
The proposed ‘payday super’ reforms would mandate that employers pay superannuation concurrently with wages, rather than adhering to the current practice of quarterly payments. Announced in May 2023, these reforms are scheduled to take effect in July 2024, pending governmental legislation.
Georgia Brumby, Deputy CEO of the Super Members Council, has expressed that delays in introducing this legislation would directly impact Australians’ retirement savings, stating, "The sooner this legislation is introduced and passed, the more time and certainty it will give businesses and the super payment system to prepare."
She further emphasised the benefits of the proposed changes: “Payday super will not only stamp out unpaid super – it’ll put nearly $8,000 more in the average Australian’s pocket at retirement, thanks to more frequent payments and the power of compounding.”
Calls for Delay in Implementation
Despite the proposed reforms, prominent accounting organisations, including CPA Australia, CA ANZ, and the Tax Institute, support the initiative but advocate for a deferment of its implementation date, suggesting it should be postponed for 12 to 24 months. They argue that the complexities involved in processing super payments compared to wages necessitate more time for businesses to adapt.
In the case of missed payments, employers will face a seven-day deadline from wage payments to remit superannuation. Failure to comply would result in additional penalties, covering the shortfall, daily interest, and enforcement charges.
ATO Actions on Unpaid Super
Recent reports from the ATO indicated that their enforcement actions have recovered $932 million in unpaid super for 797,000 employees in the past year. Over 92% of super entitlements were reportedly paid without intervention from the ATO. Employees are encouraged to check their super accounts through myGov to validate the contributions made by their employers.
If workers suspect that their super has not been deposited accurately, the ATO recommends contacting both the employer and the nominated super fund. For unresolved issues, individuals can report unpaid super through the ATO’s official channels.
This troubling situation shines a light on the importance of ensuring superannuation payments are made correctly and in a timely manner, vital for the financial security of millions of Australians in their retirement years. With impending reforms, there lies an opportunity for substantial improvement in the retirement landscape, provided timely action is taken by lawmakers and adherence from employers.
