Would it bother you if your weekly or fortnightly pay was consistently 10% short? Once you noticed, would you do something about it? If you’re like most Australians, the answer would be a resounding “Yes!”.
Here’s the scary part: this is exactly what’s happening to as many as one in three Australians. So, what’s the cause?
Employers underpaying superannuation.
How Does Superannuation Work?
Superannuation, or super, is a pretty simple idea, and it’s great for workers. In the early 1990s, the Australian Government made it law that employers must take a percentage of an employee’s ordinary earnings and pay it to a separate retirement savings account called superannuation. Employees can’t access the funds until they retire, which means that every super account grows over decades.
Superannuation funds are invested on your behalf in a range of assets like shares, cash and property, with one objective: to grow it for your retirement.
The superannuation guarantee is currently 11% which means that for every $1,000 you earn, your employer pays an extra $110 into your superannuation account. As time goes by, these numbers really add up.
For example, a 30-year-old earning $60,000 a year and working until the retirement age of 65 with a standard ‘growth option’ superannuation account will have about $309,715 when they retire!
The Billion-Dollar Question: Are our employers paying the required super contributions?
When you multiply numbers like that across the whole Australian working population it becomes pretty clear that superannuation is a multibillion-dollar industry. But this multibillion-dollar industry is also hiding a billion-dollar problem.
Millions of Australians might be missing out on their fair share of superannuation – and you might be one of them.
In fact, a recent Guardian article stated that around a quarter of employees in Australia miss out on an average of $1,700 per year in unpaid super. This can easily add up to hundreds of thousands of dollars in retirement money for each person affected. And to put it into real dollars, it was estimated that $3.4 billion of super was not paid to Australians during the financial year.
How Could This Happen?
Employers pay superannuation at the end of every quarter to their employees’ superannuation fund. But unlike weekly pay, superannuation usually isn’t closely watched by an employee because it does not affect their take-home pay. So, if an employer doesn’t make their legally required superannuation payments to their staff, it’s hard to spot.
These late or missing payments by employers can occur for many reasons, including:
- Innocent mistakes,
- Poor administration due to busy periods, employee growth or inadequate systems,
- Cash flow problems leading to an inability to meet superannuation obligations, or
- Deliberate avoidance of superannuation obligations
Regardless of the reason, the result is the same – workers are underpaid and don’t receive the super money they are entitled to. It’s reported that the average underpayment is around $1,700 each year. If you take that level of underpayment and apply all the same facts to our example above, it’s shocking how much your retirement nest egg could be shrinking.
The great news is, Australian Government is making things simpler for you to keep an eye on your super payments. Thanks to some new changes, employers will need to pay your super money every time you get paid, instead of every three months.
So, what can you do to find out if you have unpaid super?
How to Find Your Unpaid Super
There are only two steps to make sure you have received the correct super payments from your employer:
- Check your regular pay slip or end-of-year income statement. It should contain a section that shows how much super your employer has contributed. Multiply your ordinary salary by 0.11 (which is 11%). The superannuation contribution figure listed on your payslip or PAYG payment summary should be very close to the number you calculate.
- Next, find your most recent statement from your superannuation fund and check that the amounts deposited to your account match the amounts listed on your payslips or payment summaries. (If you can’t find your super account details, your employer will have them and can provide them to you on request.)
But, what if the numbers at step one or step two above don’t match?
Help! I Think My Super Has Been Underpaid! What do I do?
The first and simplest thing to do is to contact your employer and ask if they can explain the difference. In most cases your employer will want to correct the situation.
However, if your employer is unhelpful, the Australian Taxation Office (ATO) can investigate matters of exactly this kind. If you think you have been underpaid, then contact the ATO to begin an investigation.
They will look at your claim and investigate on your behalf. Getting the ATO involved is a positive step for employees, as businesses are far more likely to take the complaint seriously when they are formally investigated by a government authority.
A couple of years back, the ATO also gained the authority to issue “payment directives” for superannuation. Neglecting to follow one of these directives can result in a penalty of up to $15,650, a 12-month prison sentence, or a combination of both. But here’s the surprising part: according to a recent Guardian article, the ATO has yet to issue a single payment directive.
Despite this issue, it’s worth calling the ATO and following up on the status of your case, to ensure you get paid the super you deserve.
Your super is YOUR Money!
At the end of the day, superannuation is money that you’ve earned and are legally entitled to. It can make the difference between a tough retirement and a comfortable one. Don’t let yourself be thousands of dollars worse off in retirement. Check your balance today – it could be the best investment of ten minutes that you ever make.
Special Note: This is very different to lost super!
Unpaid Super is different to Lost Super. Unpaid super is money that you earned and deserve, that should be paid into your super fund by an employer but wasn’t.
Lost super generally refers to super accounts that you might have forgotten about or didn’t know about. Those accounts can contain lots of money being eaten away by duplicate fund fees or insurance policies. This can reduce your retirement savings. You can read more here about how to find lost super.