Superannuation is never far from the daily news. With the recent change in Government, there is an increasing debate on how the superannuation system in this country works. Should there be greater or fewer tax concessions for payments to superannuation? Will our pension system be sustainable? The superannuation landscape is constantly evolving and many clients are left wondering what to do. Further, proposed changes to the penalty regime for late payment of superannuation should have employees worried.
With employers required to make their quarterly superannuation contributions today, we thought it would be beneficial to outline exactly what is expected of an employer. From the other side of the equation, we thought we would outline what happens when an employee does not receive the superannuation they are entitled to. Unfortunately this is more common than most realise.
Today we are beginning a case study into what happens when your employer does not pay your superannuation.
EMPLOYER
WHAT DOES THE EMPLOYER NEED TO DO?
The minimum super you must pay each quarter for each eligible employee is called the superannuation guarantee (SG).
Currently the SG is 9.5% of an employees ordinary time earnings (OTE).
OTE is usually the amount your employee earns for their ordinary hours of work. It includes things like commissions, shift loadings and allowances, but not overtime payments.
So if an employee’s OTE during the period 1 July 2015 – 30 September 2015 was $8,000.00, the employer is required to pay $760.00 ($8,000.00 x 9.5%) to a complying super fund or Retirement Savings Account (RSA) by 28th October 2015.
This needs to be paid for each quarter based on the following dates:
- Quarter 1 – 1 July -30 September by 28 October
- Quarter 2 – 1 October – 31 December by 28 January
- Quarter 3 – 1 January – 31 March by 28 April
- Quarter 3 – 1 April – 30 June by 28 July
Sounds simple and most employers do the right thing. Some even pay monthly.
WHAT HAPPENS IF THE EMPLOYER DOESN’T PAY ON TIME?
When the minimum superannuation payments are not made on time the employer needs to pay the superannuation guarantee charge (SGC) to The Australian Taxation Office. What’s this?
The charge is made up of:
- SG shortfall (the superannuation that should have been paid) amounts calculated on your employee’s salary or wages;
- interest on those amounts (currently 10%)
- an administration fee ($20 per employee, per quarter).
The missed payment is sent to the Australian Taxation Office by lodging an SGC statement.
The employer must lodge your SGC statement and pay the charge by the due date.
- Quarter 1 – 1 July -30 September by 28 November
- Quarter 2 – 1 October – 31 December by 28 February
- Quarter 3 – 1 January – 31 March by 28 May
- Quarter 3 – 1 April – 30 June by 28 August
Again, this sounds simple and most employers do the right thing. What happens if the employer then does not pay the superannuation guarantee charge on time? What happens if they are several years behind?
EMPLOYEE
Unfortunately there are employers who consider their employees superannuation to be a source of cash to tide the business over or who simply do not believe they should pay their superannuation obligations.
One such case is a client named “Katrina”. Katrina worked for the same employer for almost 10 years. She turned up for work every day and performed her duties to the best of her ability. Her employer failed to pay her SG on time. Her employer then did not pay her SGC by the due date. In fact during Katrina’s 10 years of employment (40 quarters), not once was her SG paid on time.
So what should Katrina do? According to the Australian Taxation Office, she should have taken the following steps:
- Talk to your employer. You should ask them how often they are currently paying your super, into which fund they are paying it and how much they are paying.
- Check your last Member statement from your super fund or contact them to confirm whether your employer has paid your super contributions.
- Create or log in to your myGov account to access online services including checking how much super has been paid into your super fund, and details of all your super funds including any you have lost track of.
- Lodge an enquiry. If you have completed steps 1 and 2 and still believe your employer is not paying enough, or any, super, or is not paying the super to your chosen fund, you can lodge an enquiry about unpaid super by using the online Employee superannuation guarantee (SG) calculator tool.
Katrina did all these things. She received no feedback or reconciliations from her employer regarding the unpaid superannuation. Her member statements did not show any super contributions being paid into her fund. Her super fund confirmed that she had not been paid any superannuation into her account and a search for lost superannuation did not reveal any superannuation paid elsewhere.
Finally she lodged an enquiry with the Australian Taxation Office.
The enquiry which covered the first 8 years of her employment took the ATO 3 years to complete despite numerous attempts by Katrina to speed the process along.
During the period of the enquiry, the Australian Taxation Office was able to collect unpaid superannuation from her employer. However at no point during this process was Katrina provided with any reconciliation of these amounts from her employer.
Katrina left her employer and we have assisted her in lodging a second enquiry to the Australian Taxation Office into the remaining 2 years of her employment.
We will continue to actively pursue this case for Katrina including engaging the Inspector General of Taxation and her Federal Member of Parliament.
We will keep you informed of Katrina’s progress and let you know what you could do if you find yourself in the same position as she has.