Rogue employers who hold back their workers’ superannuation entitlements to boost their own cash flows will be targeted by a new regulatory crackdown announced today.
Currently, there is a loophole where employers can legally withhold their workers’ salary sacrifice contributions for up to four months, before transferring the money into their superannuation account.
Financial Services Minister Kelly O’Dwyer said under new legislation, “unscrupulous employers who short-change employees” in this way will be reined in.
“If Australians are to continue to have confidence in the integrity of the superannuation system, we must ensure employers are paying workers their full entitlements, whether they are wages or superannuation,” Ms O’Dwyer said in a statement.
She later told The World Today some employers “have in fact been doing the wrong thing”.
“They are using a legal loophole right now and that’s why the Government has moved very swiftly to announce that we will close this loophole,” she said.
The crackdown comes after revelations late last year that as many as 360,000 employees are affected by the salary sacrifice loophole.
Furthermore, some workers might be missing large parts of their employer superannuation contributions.
The new regulations come after a cross-agency investigation into employer superannuation payments involving the Australian Tax Office (ATO), Australian Securities & Investments Commission (ASIC), Australian Prudential Regulation Authority (APRA) and the Department of Employment.
Tip of the iceberg?
It might just be a few bad apples exploiting the loopholes, according to Scott Barklamb, manager of workplace relations at the Australian Chamber of Commerce and Industry.
“There is certainly non-compliance in almost every area of our community, in our tax laws and in our super laws,” Mr Barklamb said.
“But employers spend millions of dollars to try and do the exactly right thing on superannuation and to support their employees in managing their retirement incomes.”
However, the crackdown has been cautiously welcomed by Industry Super Australia, which has claimed that a third of workers were losing $3.6 billion a year.
But closing the loophole on salary sacrificed contributions was “the tip of the iceberg”, said Matt Linden, ISA’s head of public affairs.
“Amending the law to require employers to pay super more frequently — at least monthly but ideally at the same time as wages — is essential to stop super payments being used for business cash flow,” he said.
“Without taking these extra steps millions of Australians will continue to be short-changed billions in super, with the Government having to pick up the tab with higher age pension costs.”
The Government said it is looking at other outcomes of the working group study to widen scrutiny of employers to ensure contributions are promptly paid.