Unpaid super can start to add up
EACH year, billions of dollars of workers’ super contributions go unpaid, and the Tax Office is cracking down on employers who dodge their compulsory super obligations.
The vast majority of bosses – 95% – do the right thing and pay their employee super contributions. The 5% who don’t may not sound like much but the Tax Office says unpaid super contributions added up to $2.85 billion in 2014-15 alone.
That’s a lot of money that should be going into workers’ retirement nest eggs.
One area behind unpaid super contributions is the so-called black economy. Workers in some industries may, for example, be encouraged to receive their wage as cash in hand.
This can sound tempting but it means missing out on employer-paid super.
Bear in mind, you can earn up to $18,200 annually or about $1517 per month before tax applies.
On that income, your employer would be responsible for monthly super contributions of $144, which can add up over time. So think twice before agreeing to be “off the books”.
Another danger zone is “sham contracting”. This is where the boss hires you as a contractor to avoid paying compulsory super (and other regular entitlements), when in fact you’re really working as an employee.
The Fair Work Ombudsman is warning about sham contracting, saying that giving the boss an ABN (Australian Business Number) doesn’t necessarily make you a contractor.
If you work regular hours on an ongoing basis under the direction of your employer, you could be regarded as an employee and entitled to employer-paid super.
If you’re unsure about your situation, check out the FWO website (www.fairwork.gov.au) for more details.
Importantly, all workers should review their super account regularly to see that employer contributions have been paid. Sure, the contributions may be listed on your pay slip but that doesn’t always mean the money has been deposited into your fund.
If it looks like you’re being short-changed, speak with your employer immediately. If you’re not happy with the response, get in touch with the Tax Office on 13 10 20.
Each year the tax office looks into about 20,000 complaints about unpaid employer contributions.
Paul Clitheroe is a founding director of financial planning firm ipac, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.
SUPER OBLIGATIONS: Are you keeping track to see if your employer super contributions are being paid?