ATO cracks down on unpaid superannuation, recovers $1.13 billion for workers

Some people might not be big fans of the police but that doesn’t stop them calling for help from those dressed in blue when they really need it.

It is a similar relationship with the Australian Tax Office, which might be everybody’s favourite sledge when they see how much money gets ripped out of their pay packets but can also turn out to be a great ally in times of need.

One of those times is when you are owed superannuation by an employer and in that role the good women and men of the ATO have been getting much better at chasing down those missing dollars.

In the last financial year, the ATO upped its compliance efforts on unpaid super and managed to get an impressive $1.13 billion paid, although a further $3.6 billion remains unpaid.

Recovery efforts improving

Fortunately, the ATO is big enough and bad enough to manage to get $445 million of the $1.13 billion paid by employers voluntarily.

For those employers who put up a bit of a fight, the ATO got back a further $685 million, although $157 million of that total was in the form of penalties for non-payment.

All of the $1.13 billion pulled in by the ATO was passed on to 216,000 super fund members who were owed the money, although there is still a way to go judging by the overall estimates by Industry Super Australia back in 2020-21 that 2.9 million Australian workers are losing $4.8 billion in unpaid super.

ATO deputy commissioner Emma Rosenzweig said while most employers are doing the right thing, the ATO takes non-compliance with super guarantee obligations very seriously.

“Super belongs to employees for their future retirement savings and we do everything we can to ensure Australia’s hard-working employees are receiving their lawful entitlements from their employers,” Rosenzweig said.

Those ATO actions have included using its debt recovery powers, which were not used nearly as much during the pandemic.

Pay day alignment should improve compliance

The situation with unpaid super is expected to get much better when the industry moves to align pay day with super payments, which will make it much clearer to everybody whether the amount shown on payslips is actually going into super accounts.

That is due to happen by the middle of 2026 but may be introduced before then as the industry gradually changes.

At the moment, employers are only required to pay super quarterly so there is a significant lag in detecting a lack of payment.

APRA super figures for the June year showed that overall superannuation assets rose 7.6% to $3.54 trillion over the year.

APRA regulated funds jumped 9.3% to $2.45 trillion as the attractiveness of self-managed super funds started to wane, with SMSF balances only increasing by 3.9% to $876.4 billion.

Withdrawals starting to hit super too

The ageing of the population is starting to make a dent in super savings as well with net contributions to superannuation falling by 4.5% to $60.8 billion as older people increased their withdrawals.

Withdrawals from super grew at 19.6%, while contributions grew more slowly by 12.9% with that gap beginning to open up now.

MySuper default superannuation allocations have the majority of members, 14.3 million, even though the balances in these funds tend to be lower.

Choice funds have 7.5 million accounts, but they have $1.113 trillion in assets compared to only $911 billion for the default allocations.

Although older people have higher superannuation balances, APRA figures show that many do not have balances at a level that would enable them to enjoy a comfortable retirement according to the Association of Superannuation Funds of Australia.

ASFA estimates show that a home-owning couple would need $690,000 at age 67 to retire in comfort while a home-owning single would need $595,000, although the average balance in that age group is just $247,400.

Those figures are likely to improve when couples are both retired, thereby helping to combine the lump sums for a more comfortable retirement.