Moving superannuation payments to align with wages could give millions of Australians $50,000 more at retirement and drastically curb Australia’s unpaid super scourge which has cost workers $33 billion over seven years. The federal government should be commended for announcing in this Budget that super should be paid on payday and not at least once a quarter, a policy change that will get more workers all the super they have earned.
Why this Budget is a big positive for super payments
Two senate inquiries, Treasury and the ATO have all said moving to more frequent super payments could combat the $4.7bn a year unpaid super scourge. When combined with higher compound interest from more frequent payments the measure could mean $50,000 more at retirement for many young workers who will now avoid being underpaid their super.
This measure is one of the most significant improvements to the superannuation system in 30 years, and when combined with $40 million for regulators to crackdown on the employers deliberately underpaying superannuation, has the potential to deliver billions more into the retirement savings of millions of Australian workers. The big winners are younger, lower paid workers – including high proportion of women – who are most likely to be underpaid super.
And 8.9 million Australians will get their super paid more frequently, earning potentially thousands more throughout their working life as more frequent payments attract compound interest for longer. Quarterly super payments made it difficult for workers to keep track of payments and for the Australian Taxation Office to monitor compliance in real time.
The $40m in additional resources for the ATO allows the regulator to detect unpaid super in real time and arms it to crack down on the relatively small number of dodgy bosses who deliberately rip workers off. While ISA recognises the govt’s commitment to deliver super on parental leave, it is disappointing it was not in the budget particularly given the opportunity to reinvest savings derived from the $3m tax concession changes to fund the measure.
Where do we go next?
ISA will further advocate for super to be paid on PPL and to increase the Low-Income Superannuation Tax Offset at the earliest opportunity the budget allows. This Budget delivers a big win for the 3 million mostly young and lower paid Australians unfairly deprived the super they’ve earned and will give them a better shot at building a good nest egg for retirement.
The govt should be commended for listening and taking steps to end the huge super rip off which was undermining the future economic security of too many young women and others on lower incomes. Aligning payment of super and wages is the right thing to do by workers, boosts govt revenue, lifts investment returns and puts all employers on a level playing field.
Payday superannuation gets many younger women what they are owed, but more needs to be done and bridging the gender super gap starts with paying super on parental leave.
Bernie Dean is the Chief Executive at Industry Super Australia.
