Superannuation refunds an unexpected windfall
For a lot of workers, the first thing they will know about their superannuation being underpaid is when an unexpected payment for around $1,500 arrives in their super account.
It could be a lot more or a lot less depending on the individual case but overall, $588 million will be paid to around 393,000 workers as part of the Federal Government’s superannuation guarantee amnesty.
Under that plan, underpaid workers will be handed back unpaid or underpaid superannuation directly into their super funds – or, if they are no longer working, into their bank accounts.
One-off amnesty
It is a one-off opportunity that was offered over the past six months – companies that haven’t taken part in the amnesty but are found to have underpaid superannuation will now face much harsher enforcement action if they are discovered.
Assistant Minister for Superannuation, Financial Services and Financial Technology, Senator Jane Hume said the amnesty was “reuniting Australians with money that is rightfully theirs, making sure every dollar that is owed to workers goes back to them”.
The unpaid or underpaid amounts could date back all of the way to 1992 when the compulsory super system was introduced in Australia.
“We know that in the past calculating the super guarantee has been very complicated,” said Senator Hume.
She said the amnesty allowed honest businesses to check to see if they had done the wrong thing with super payments and to make up the amount.
Payments made at the last minute
The repayments were in many cases a very last-minute thing with about 55% of businesses that confessed to not making compulsory payments applying in the last week of the amnesty.
An amazing 7,000 businesses applied on the final day, ensuring that payments made before the cut-off were tax deductible.
The money being repaid includes about $440 million which has been transferred to super funds including $132 million in late payment offsets and 10% interest for each year the payment was outstanding.
A further $33 million will be paid over time through agreed payment plans.
While the payments might seem like good news, they are believed to be just a small fraction of the total amount due. Estimates are that workers are robbed of more than $3 billion a year.
That has led to calls from groups including the Australian Institute of Superannuation Trustees for much greater penalties for employers who effectively short-change their workers’ superannuation payments.
Debate on super guarantee rises still raging
The payments come as the debate rages over whether compulsory super payments should follow their legislated path to increase from the current 9.5% to 10% in July next year and through to 12% by 2025.
There have been calls within the Liberal Party for these increases to be halted due to the impact of the COVID-19 pandemic and the need for wages growth so that consumers have more cash to spend.
Even the Reserve Bank of Australia Governor Philip Lowe has weighed into the argument, saying that lifting the super guarantee from the current 9.5% would result in reduced wages and lower consumer spending and potentially job growth.
That statement was strongly contradicted by superannuation pioneer and former Treasurer Paul Keating Paul Keating who accused Dr Lowe of failing to comprehend “the key income facts of the last eight years”.
Mr Keating said there had been “zero” wages growth since 2012 and there had been no increase in superannuation since 2013.
“It is possible to make a case in the very long run, over 30 or 50 years, that the allocation of superannuation may come at a cost of cash wages, but it is impossible to argue that now,’’ Mr Keating said.
Early release scheme has so far paid out $33.3 billion
The other highly controversial superannuation issue has been the withdrawal of $33.3 billion from personal superannuation accounts as part of an early release package to deal with coronavirus support.
Up to 13 September, 4.5 million applications had been lodged with the Australian Taxation Office for early release of super, equating to $34.2 billion, and 1.3 million applications are from people who have made a repeat claim.
The Federal Government implemented the early release scheme in April to support Australians who have experienced financial hardship due to the pandemic.
It allows fund members to access up to $20,000 in both the 2020 and 2021 financial years.
Industry funds hit hardest
Five major industry funds alone – AustralianSuper, Sunsuper, REST, Hostplus and Cbus –have paid out a cumulative $16.2 billion to workers who have been disadvantaged by the pandemic.
Industry Super Australia (ISA), which represents 15 funds, has claimed that the scheme has wiped out the retirement savings of almost 500,000 Australians and that the early release scheme would lead to rising aged pension costs if accounts accessed were not replenished with new contribution payments.
“People know that by up-ending the whole purpose of super and then cutting contributions, the government is thinking about the short term and ignoring how it will lumber people with tax hikes to support millions more scraping by on the pension,” ISA chief executive Bernie Dean said.
“Rebuilding balances now is critical to avoiding the worst impacts of higher taxes, less in retirement and a slower economy.”