ATO shines light on unpaid superannuation structural issues

The Australian Taxation Office (ATO) has pointed to structural issues around timing of superannuation information by employers and the timing of payments as a key factor driving unpaid super claims.

The ATO estimated the superannuation gap to be $2.45 billion of which $560 million in unpaid super was recovered last financial year, but Industry Super Australia (ISA) believed the figure was double.

Speaking at Senate Estimates, Emma Rosenzweig, ATO deputy commissioner, superannuation and employer obligations said the scale of the problem could be demonstrated through the fact that $880 million in superannuation liability had been created following a review of 19,600 compliance activities in financial year 2020-21.

Labor Senator Jess Walsh asked if $560 million was collected last financial year then “where’s the rest?”

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In reply, ATO’s Jeremy Hirschhorn, second commissioner, client engagement group, said: “by extrapolating from the part that we know about, there are, potentially, lots of little bits of non-payment which, when an employee comes to us, we try to ferret out with our best efforts.

“We are trying to identify other examples, even where the employee does not realise. Indeed, we try to give every tool to employees to identify whether their employer is meeting their obligations.

He said super money did not come via the tax office but instead from the employer to the super fund.

“We are using our data as best we can, to try to identify where it's not paid, but we can't audit every employment relationship,” Hirschhorn said.

Chris Jordan, ATO commissioner of taxation, said it was important to consider that a “relatively significant amount” of unpaid super came from small to medium sized businesses that had become insolvent with no money that the ATO could recover.

“However, we have a lag in being able to use the information that super funds give us about amounts received from employees—and this is a big deal, just to be able to do that, in itself—versus the promise to pay reported under the Single Touch Payroll (STP) system,” Jordan said.

“So it's sort of a structural issue here that we're dealing with, and we're using our data through STP and the data we get from the super funds as best as we can.

“This is a terrible situation, no doubt in the world. This is money that employees lose.

“The pay-as-you-go I referred to that doesn't get paid, the government stand behind that; they credit that to you in your tax return if it's not paid first. The same is not for super contributions, so it's a real loss for the employee, and that's why we prioritise it hugely in the ATO, because of that real loss to the employee.”

In late 2021, ISA launched a report recommending fixing what it called an “unpaid super scourge” by mandating all employers pay super into a workers’ account when they pay wages.

Not paying super with wages made it difficult for workers to keep track of their money and allowed payments to fall through the crack, said ISA.

Minister for finance, Senator Simon Birmingham said the Government was concerned about unpaid super which was why it increased ATO’s superannuation recovery powers in 2018.

“Whilst this is an ongoing challenge, as Commissioner Jordan has made very clear, the ATO has conducted more than 19,000 reviews, informed by its data and its analysis, and the targeting,” he said.