Fixing unpaid super will make the system fairer for workers and employers alike

A new report on Australia’s unpaid super scourge shows the about $5 billion-a-year problem is stubbornly enduring – depriving millions of Australians of the full transformative benefits of the world’s leading super system.

And while most businesses are doing the right thing, legislative reform is urgently needed to stop rival firms that are not paying staff their full super entitlements from undercutting them.

The new analysis by the Super Members Council (SMC) – the non-partisan peak body advocating for 11 million Australians with their retirement savings in profit-to-member super funds – shows the scale of the challenge, and the need for urgent legislative reform and stronger compliance action.

To ensure Australians are paid their super on time and in full, SMC calls on the Australian Government to legislate that super must be paid on payday, set unpaid super recovery targets for the ATO, and support workers to claim their super after insolvencies.  

New SMC analysis in a report on unpaid super found:

• In one year, 2.8 million Australians missed out on $5.1 billion in legal super entitlements (2021-22)
• Over 9 years, Australians have missed out on $41.6 billion in unpaid super
• The average affected worker missed out on $1,800 in super in a year – which could mean more than $30,000 less in retirement savings for a typical worker; and
• The problem is getting worse – with Australians losing more money at a higher average.

Women, people in insecure work, migrant workers and younger workers are more likely to have unpaid super, the new analysis of the ATO’s 2 per cent sample tax file shows. Workers in their 20s who earn less than 25,000 a year have a one in two chance of being underpaid their super.

A key driver of unpaid super is an outdated payment system that allows super to paid once a quarter. This mismatch payment schedules between wages and super makes it difficult for workers to track underpayments and harder for the Australian Tax Office (ATO) to use its real-time monitoring tools.

In a positive step, the Australian Government has pledged to enact payday super reforms by 2026. But legislation is yet to be introduced to Parliament and design implementation detail is not yet clear.

Super Members Council CEO Misha Schubert said the clock was ticking to enact the promised reforms in this term of Parliament – which was important to help businesses to plan – and urged swifter progress on introducing stronger laws to ensure millions of Australians were paid their super.

“Paying super on payday will modernise the super system and should hugely reduce underpayments. It’s an excellent example of reform to benefit super fund members, which will make super fairer for workers and employers alike,” Ms Schubert said.

“Unpaid super locks too many Australians out of the full transformative benefits of the retirement system and leaves people poorer when they retire. A unified push is needed to stamp it out.”

The Government is also yet to set unpaid super compliance and recovery targets for the Australian Tax Office – a commitment it made in 2022. And while the ATO’s compliance action has lifted, it still on average only collects 15 per cent of the nation’s unpaid super bill a year.   

Unpaid super is often discovered when a business goes bust, so the Government’s compensation scheme of last resort for workers – the Fair Entitlement Guarantee – should also be extended to super.

“Legislation to pay super on payday, combined with a stronger ATO enforcement regime and better support for workers to claim their super after insolvencies, is crucial to ensure millions of Australians who are currently being short-changed are paid their super on time and in full,” Ms Schubert said.

“We stand ready to work with the Government, Parliament and other key stakeholders to enact these pivotal reforms and ensure Australia fixes the stubbornly persistent unpaid super problem.”