Payday super will ameliorate, not cure unpaid super

Even after the implementation of Payday Superannuation unpaid superannuation guarantee contributions will continue to be a problem, according to the Association of Superannuation Funds of Australia (ASFA).

What is more, ASFA has suggested that, thus far, an expansion of the Fair Entitlement Guarantee (FEG) regime in July, last year, has failed to result in substantial recovery of unpaid entitlements.

Responding to a discussion on the FEG regime being undertaken by the Department of Employment and Workplace Relations (DEWR), said that while recent and proposed changes to reporting and payment requirements for employers give greater visibility to the Australian Taxation Office (ATO) for unpaid employer contributions “it is likely that even after the implementation of Payday Superannuation there will be continuing cases where there are unpaid contributions when businesses become insolvent”.

ASFA also noted that the DEWR discussion paper had referenced that in 2023-24, a potential employee entitlement defeating transaction/agreement was identified in 39% of large FEG cases. The total advances paid in these cases was $52.7 million, just under a quarter of total advances paid in 2023-24. The average estimated unpaid Super Guarantee Charge in these cases was $258,982 (relative to average FEG advances of $431,980 per case).

“ASFA also notes that the FEG Recovery Program has been expanded, from 1 July 2024, to actively pursue recovery of unpaid Superannuation Guarantee Charge amounts from insolvent employers. However, there is no evidence at this stage that any substantial recoveries of such amounts have been actually made,” it said.

“ASFA considers that unpaid Superannuation Guarantee amounts should be treated the same way for the purposes of the FEG as unpaid wages as both make up the remuneration of employees.

“If the ATO is subsequently able to raise an SG charge against an employer this would in effect offset any SG related payments made though the FEG arrangements. However, any amounts recovered by the ATO in regard to interest or penalties related to payment of the superannuation guarantee charge should be made available to employees to meet any shortfall in Superannuation Guarantee contributions in regard to such employees,” it said.

“ASFA also considers that payment of Superannuation Guarantee Charge liabilities of insolvent employers should take priority over amounts payable under the FEG Recovery Program in regard to payments that have been made by the Commonwealth relating to unpaid wages. This would both be more equitable and consistent with the 2024 decision to actively pursue recovery of unpaid Superannuation Guarantee Charge amounts from insolvent employer.”