Yahoo Finance Super change to benefit 8.9m Aussies
Millions of Australian workers will soon be better off at retirement as the government works to close a superannuation loophole.
In a move Treasurer Jim Chalmers says would ensure millions of workers are better off, and part of the government’s broader bid to strengthen the super system, legislation will soon be introduced that would make it mandatory for employers to pay the superannuation guarantee every time they pay salary or wages from July 1, 2026.
In doing so, the government will crack down on what is essentially wage theft, with the Australian Taxation Office estimating that employees were owed $3.4bn in super payments in 2019-20.
Unions had pleaded to the former Coalition government for years to tighten the system.
The government will release a discussion paper on Monday, seeking feedback from industry and stakeholder groups in addressing the issue of unpaid superannuation ahead of introducing legislation.
Dr Chalmers and Assistant Treasurer Stephen Jones said an estimated 8.9m Australians would have higher retirement savings if they received their super guarantees earlier and more frequently throughout their working lives.
They said that by switching to payday super, a 25-year-old earning the median income currently receiving their super payments quarterly and wages fortnightly could be around $6000 better off at retirement.
The superannuation guarantee rate is currently 11 per cent, but will reach 12 per cent by July 1, 2025.
As it currently stands, it is illegal to not pay workers the super guarantee. If employers do not pay the correct entitlements to an employee by the quarterly payment date, they may be liable for the Superannuation Guarantee charge payable to the ATO.
But shortfalls in the current design of the system means that many obligations remain unpaid for extended periods of time, causing significant issues should employers enter liquidation without having paid their obligations.
“Non-payment and underpayment of SG contributions is equivalent to wage theft and has significant impacts on retirement outcomes – delaying retirement, reducing the retirement savings of individuals due to the loss of compounding returns in the fund and results in a loss of insurance coverage for some members. Further, employers who are consistently complying with their SG obligations don’t have a level playing field with non-compliant employers,” the paper says.
The paper says that by increasing the payment frequency of super to align with salary and wages, this will “both ensure employees have greater visibility over whether contributions have been correctly paid; additional time in the fund for employees to benefit from compounding returns, and increase the likelihood of the ATO being able to recover unpaid SG through earlier detection and compliance action”.
The latest bid to strengthen the super system follows the government’s release of draft legislation to crack down on generous tax concessions for Australians with more than $3m in superannuation savings.
The rate will be doubled from 15 per cent to 30 per cent on all earnings over that figure.
Earlier this year, Labor released draft laws defining the objective of superannuation as, among other things, the preservation of savings in an “equitable and sustainable way” to allow for “dignified” retirement.
The consultation paper also seeks feedback on how employee onboarding and their choice of fund could be improved under payday super.
Consultation closes on November 3.
