Hospitality is one of the worst industries for superannuation non-compliance. Considering how many university students engage in hospitality work to make ends meet while studying, it is likely that unpaid superannuation is the first legal issue that most of us will encounter over the course of our lives.
In Australia, if you are over 18 years old and earn at least $450 a month (before tax), or you are under 18 years old, being paid $450 or more (before tax) in a calendar month and work more than 30 hours in a week, your employer is required to make contributions to your super fund. Due quarterly, the basic objective of the 9.5% minimum contribution is to provide you with a source of income in retirement.
But if you discover that your employer has not been meeting their superannuation obligations, you will likely find yourself moving through four main stages of financial grief.
Your initial reaction may be to let it go.
Many people find the prospect of speaking up too scary or overwhelming because they don’t fully understand their entitlements and don’t want to cause trouble with their employer.
This is the attitude your not-so-super employer is counting on. If you find yourself hesitant to speak up out of fear of the potentially serious consequences for your employer, remember that it is their choice to break the law by failing to pay your compulsory superannuation contributions.
It is also likely that this is not an isolated event. As Adriano Zumbo (who made headlines this week for failing to pay his young staff superannuation and overtime proves), if one employee is affected, other staff in your organisation are also likely to be affected. Your decision to speak up could benefit a number of your colleagues who may not be fully aware of their entitlements.
Another kind of denial you may experience is to deny the severity of the situation by wrongly convincing yourself that there is nothing to gain from chasing up unpaid super:
It’s just super! There is no immediate benefit, and I’ll get another job – a proper full-time job – once uni is over.”
Remember that everything you do plays a role in shaping who you are and who you will become.
The reality is that we are all working towards our future and you shouldn’t downplay the situation because casual work while studying is not part of your bigger picture – because it is. To move forward, out of the denial stage try to avoid hiding from the facts – at 25 years of age, every $1,000 in your superannuation becomes $14,000 by retirement.
That little kernel of truth should do the trick to catapult you straight to the next stage of financial grief …
Once you become informed, anger will inevitably follow.
Unethical employers justify their actions on the basis that it is not personal. But if you have a good working relationship with your employer, and genuinely want to see them succeed, particularly if they run a small business, their decision to cheat you out of your entitlements can feel very personal and manipulative.
At this stage, you might find yourself asking why your employer would do this – and the glaringly obvious answer is because it is more money in their pocket. But it is so much more than that. While the employer superannuation contribution might not be finding its way to your super fund, you can almost guarantee that your employer is claiming it as a tax deduction.
Put simply, this means it reduces their taxable income and they end up paying less tax. However, there is a distinct difference between tax avoidance and tax evasion: the former means avoiding tax in legal ways, while not paying super falls under the latter. It’s fraud, and it’s a crime.
Depending on your situation, you might find yourself stuck in an anger cycle for quite a while – I know I did. You may find it hard to go to work and the compounded stress of the situation may start to negatively impact your wellbeing and close relationships.
If this is happening to you, it’s time to take control.
Money is always awkward to talk about, there’s no way around that.
By the bargaining stage, you should be ready to deal with the issue directly by talking to your employer.
Equip yourself with as much information as possible. If you think that your employer is avoiding their superannuation obligations, or not paying you the correct amount, do some preliminary investigating to confirm your suspicions:
- Check your MyGov account to see how much your employer has contributed to date
- If you are not sure which super account payments are made to, talk to your payroll officer. Ask which super account your payments are made to, and how often they are made
- Look at when your employer is making contributions, if any, in your super fund account and how frequently (weekly, fortnightly, monthly or quarterly) they are being made
- Check with your super fund about whether those payments are being received from your employer as it may be a simple administrative error
Print out all your statements and calculate how much you are owed.
In some cases, unpaid super may be an honest oversight and it’s important to give your employer the opportunity to amend it by raising the issue directly with them before reporting it to the ATO. Remember that you are not asking for anything that you are not entitled to.
If you have spoken to your employer, and they are still not paying your super, their behaviour may be intentional avoidance of the superannuation guarantee. In the acceptance stage, it’s time to take positive action.
Lodge an unpaid super enquiry with the Australian Tax Office (ATO). This is an online form, in which you provide details such as your tax file number, chosen superannuation fund and corresponding account number, your employer’s business number and, permission to disclose your name to your employer during their investigation.
Once the ATO receives your enquiry, they will begin an investigation as to whether you are owed superannuation. This involves requesting information from your employer and can take up to 4-6 months.
If a superannuation debt is established, the ATO will inform you of the amount owing to you. This amount includes the super owed to you, plus interest (currently 10%) as well as an administration fee.
Unpaid superannuation – need for change
In 40% of superannuation complaints received by the ATO, this is where the road ends.
Where the cost of an investigation is greater than the amount owing to you, the investigation may not proceed. It is clear that this is an area in need of attention.
The ATO knows that small businesses employing young, low-income earners (hi, Uni students) are most likely to be non-compliant with compulsory superannuation contributions. These ‘high risk’ employers are selected for random auditing, but with analysis of ATO data showing that there is over $3.66 billion in unpaid super in Australia, there is still work to be done.
Obtaining outstanding superannuation contributions is not a specific function of the ATO. So whose responsibility is it?
Greater scrutiny and accountability for financial professionals
Is it the responsibility of the accountant who, in some cases, actively assists unethical employers with tax evasion? Perhaps stronger and more serious penalties need to be put in place for accountants who orchestrate ways for clients to evade their legal obligations or for making misleading statements or representations when dealing with a business’ tax affairs.
Perhaps the Code of Ethics for Professional Accountants needs to be updated and tightened so that accountants are bound to maintain a similar standard of professional conduct as lawyers, and are held more strictly to account for maintaining the integrity of the Australian taxation system.
Or should super funds take a more active role in protecting the entitlements of their members?
Some super funds send follow up letters to employers whose contributions are falling behind. These letters serve as reminders regarding an employer’s superannuation obligations and reiterate the risks and penalties associated with non-compliance. But such letters ultimately lack the required authority.
Ultimately, I believe that part of the answer to Australia’s massive unpaid superannuation problem is technology. The government’s MyGov system is a centralised place where it is possible to Log In and access Medicare, Centrelink, the ATO, view your scary HECS debt as well as the total amount you have saved in superannuation.
It seems that a viable solution to Australia’s massive unpaid superannuation problem may be to amalgamate and refine the existing MyGov system. Perhaps with a few adjustments, the system could red flag when an individual’s income and the amount contributed to their superannuation fund do not match.
This type of digital flag could automatically send a warning to an employer, and a notification to an employee, that attention is required. Where no positive action is taken to make the required contributions within a specified timeframe, an automatic report could be filed with the ATO for investigation. The benefit of such a system would relieve the need for employees to proactively be aware of their rights and to raise it with unethical employers.
Don’t fall into the trap of denying the seriousness of your unpaid super situation, staying angry, or not taking any action at all because you don’t know what to do. In these situations, the only outcome to be achieved from silence is to your detriment.
Instead, arm yourself with the information we mention and open a dialogue with your employer. If this strategy is ineffective, weigh up whether your next step is to make an official report to the ATO.
Have you, or anyone you know, ever been in a situation where your employer is not paying your superannuation entitlements? How did you handle it? Let us know in the comments!
If you think your employer is not paying enough superannuation, or not paying your super at all, report it to the Australian Tax Office (ATO):
Call 13 10 20 or use the online form.