How would you feel if your employer chopped off part of your pay every week? That’s exactly what may happen if your super is being underpaid by your employer.
The Australian Taxation Office (ATO) states that employees over the age of 18 are entitled by law to receive superannuation payments from their employer, regardless of whether they work full-time, part-time, temporary, or casual positions. From July 2022, employers are required to contribute 10.5% of an employee’s income into either their nominated super fund or an employer chosen super fund. If you are a contractor who is paid wholly or mostly for your labour, you are also entitled to superannuation guarantee contributions.
Pro Tax Tip: There are exceptions to this rule for employing domestic workers who work less than 30 hours per week.
The $3 trillion superannuation system in Australia is intended to provide a comfortable retirement for millions of citizens, but its success depends on the honesty of employers, which is not always the case. According to reports, $4.3 billion in unpaid super by employers resulted in 2.8 million Australians losing out during the 2019-2020 financial year.
What Is The Super Guarantee?
The Super guarantee is the minimum amount of superannuation your employer is required to pay into your super fund. This is based on your ordinary time earnings.
To calculate your super for the 2023 financial year, multiply your gross salary and wages by 10.5%. This is called the superannuation guarantee and is based on your Ordinary Time Earnings (OTE). However, overtime and expenses are usually not included, though some bonuses and allowances might be.
For instance, if you make $70,000 a year and get a $4,000 bonus, your super would be $7,770 (i.e., $74,000 x 10.5%).
Even if overtime is excluded from the super calculation, if you’re rostered to work overtime, the hours you actually work should be included in your ordinary hours of work.
What Is The Superannuation Rate?
|Period||General Super Guarantee|
|1 July 2018 – 30 June 2019||9.50%|
|1 July 2019 – 30 June 2020||9.50%|
|1 July 2020 – 30 June 2021||9.50%|
|1 July 2021 – 30 June 2022||10.00%|
|1 July 2022 – 30 June 2023||10.50%|
|1 July 2023 – 30 June 2024||11.00%|
|1 July 2024 – 30 June 2025||11.50%|
|1 July 2025 – 30 June 2026||12.00%|
|1 July 2026 – 30 June 2027||12.00%|
|July 2027 – 30 June 2028 and onwards||12.00%|
Pro Tax Tip: Your employer should be paying your super into your super fund at least every quarter. To maximise your compound interest over your lifetime, request a monthly payment to maximise your payments.
What Should You Do If Your Super Is Underpaid?
If you think your employer has made a mistake with your super, it’s best to talk to your employer first. But if they refuse to pay what they owe, you can ask the ATO for assistance.
To check if you’re missing out on any super, you can call your super fund or go online to check your balance. The ATO also has an “estimate my super” tool that can help you figure out how much your employer should have put into your account. Check this amount against your actual balance to see if something’s off.
Superannuation is connected to your salary, so the ATO can easily keep track of your super balance. This means that they can also help you if your employer hasn’t paid the required super amount. Not paying super is illegal, and company directors could face serious fines or even imprisonment.
The ATO has the ability to check if your employer has paid the correct amount of super into your account. If they haven’t, the ATO can make your employer pay the outstanding amount and any additional fines. These fines include interest and administration fees, which aren’t tax deductible for your employer. They could also face further penalties up to 200% of the original charge.
Your employer has to pay super into your account from your pre-tax income, so you can also check your super account statement to see if they’ve paid up. (Some employers pay quarterly, so don’t stress if you don’t see a payment with every paycheck.)
If you think you’ve been missing out on super for years, take a look at your old statements. You can file a claim for up to five years of unpaid super, but you might need to dig up some extra info, like your pay slips and fund statements. If you don’t want to go head-to-head with the ATO, your tax agent will be able to help.
Claiming Unpaid Super
- Firstly, ensure that you are eligible to receive superannuation contributions.
- Double check the last Member Statement from your super fund. You can also contact them on the phone to confirm whether your employer has paid your super contributions. It is important to check regularly as employers may not prioritize super payments during difficult times. If the company goes out of business, it may be too late to recover your unpaid super.
- Speak to your employer if you suspect that you are not receiving your full super entitlements. Most employers do the right thing, but sometimes they may miss payments or stop paying. You should ask your employer how often they are currently paying your super, how much is being paid, and to which fund it is being paid. You should also ask if you are eligible to choose your own super fund.
- Your super fund or union may also be able to assist you if you are uncomfortable speaking to your employer.
- If you still believe that your employer is not paying your super contributions or is not paying enough, you should report unpaid super by lodging an enquiry with the ATO. The ATO will investigate the matter and take appropriate action. You can do this yourself or through your tax agent.
Employers who fail to pay the correct amount of super for their employees may face a superannuation charge. This charge is composed of the missing amount, interest on that amount (currently 10%), and an administration fee. It is mandatory for employers to maintain accurate records of their superannuation.
If an employer does not pay the charge, the ATO can take stronger action, including issuing a penalty notice. Non-compliance with the penalty notice can result in significant fines and possible imprisonment for company directors. The charge is not tax deductible, which is another reason why most employers do the right thing and make their super guarantee contributions on time.
Your tax agent will be able to view your super fun and check your reported information, such as report dates, find transactions and paid amounts. This includes employer contributions made to defined benefit funds and non-employer contributions from 2018–19 onwards.
Pro Tax Tip: Tax agents can check both your concessional and non-concessional payments.
If you run into trouble, your tax agent will liaise with the ATO and navigate their complex reporting system on your behalf. Ultimately, superannuation is rightfully yours. It is money that you have earned through your employment and are legally entitled to. Take the time to check your super balance today or contact an ITP tax agent for help.