Australia’s $4bn Super blackhole impacting self-employed most

While a recent research report has predicted that the ATO’s crackdown on SG non-compliance will be effective in improving the payment of super to employees, the lack of super savings among the self-employed is expected to remain a critical issue.

           

 

As part of a recent research report, Mercer has estimated that around 935,350 of Australia’s workforce, including those that are self-employed, do not receive any kind of super, accounting for an annual $4 billion deficit in super savings.

Out of this total number, it estimated that around 400,000 Australian salaried workers have not been paid superannuation entitlements.

The estimates were based on a small sample file of tax and superannuation data from the ATO’s records for 2015–16.

The analysis was based on working Australians earning more than $8,000 per year who did not make any superannuation contributions or did not have contributions made on their behalf by an employer during the 2015–16 financial year.

The report estimated that around one in 11 workers are not paid super, while two in three self-employed do not receive any kind of superannuation payments.

It noted that the ATO has been playing a significant role in ensuring that workers are paid the minimum SG rate and has implemented a number of measures to improve compliance by employers.

“A new reporting mechanism for APRA-regulated funds, known as the Member Accounts Transaction Service (MATS), was recently introduced. Contributions for each member will be recorded and reported to the ATO at the time they occur rather than annually,” it said.

“The subsequent use of data analytics to, for example, match contributions with reported salary and PAYG tax will help improve their compliance activity.”

The ATO, it said, has also made changes to improve employees’ visibility regarding their entitlements and payments, through online services and myGov.

“All these are positive moves that will ensure better compliance of SG by employers,” the report stated.

While the ATO-led crackdown on recalcitrant employers will improve the plight of salaried workers, the self-employed remain vulnerable in terms of not receiving any super.

“The debate about legislating to force the self-employed into Australia’s superannuation system remains ongoing. Many self-employed individuals run small businesses and prioritise cash flow and re-investing into their business over saving,” it said.

“Many also believe their business will be their retirement nest egg, but that is certainly not guaranteed.”

Mercer suggested in the report that policymakers could look to the scheme used by Finland which requires self-employed workers to provide an annual wage earnings estimate, upon which pension contribution calculations are made, rather than the value of their business.

“Adopting a similar model to bring the self-employed inside the regulatory environment will provide a retirement safety net and ensure they exit the workforce with savings,” it said.

“This could be achieved by extending the SG payment to cover the self-employed, at a reduced rate initially, such as 3 per cent, to avoid a sudden and a hefty impost.”

 

Miranda Brownlee
12 April 2019
smsfadviser.com

 

More Articles

Evolution of Boeing – 1916 – 2025

Check out how Boeing planes have evolved over...

Read full article

Div 296 sparking death benefit discussions

The Division 296 impost has prompted SMSF members looking at retaining assets in super to consider the tax...

Read full article

How topping up your super each year could leave you $80,000 better off in retirement

The power of regular voluntary super contributions . As the end of the financial year approaches...

Read full article

ATO warns SMSF trustees to be aware of increase in scams

The ATO has issued a warning to SMSF trustees to be aware of scammers leading up to EOFY. . At the...

Read full article

A super contributions deadline you won’t want to miss

If you plan to get more into your super this financial year, act very quickly. . If you’re aiming to...

Read full article

Roles and Responsibilities in a Business Partnership

Set clear expectations from the start of your partnership . In Short Clearly define each...

Read full article

Leasing property owned by an SMSF

The rules for a super fund investing in property are complex because of the restrictions placed on some types...

Read full article

Beware of tax implications for failing to meet minimum pension requirements: consultant

Failing to meet the minimum pension requirements impacts a number of tax components, an industry consultant...

Read full article

Sofie Korac is an Authorised Representative (No. 400164) of Prudentia Financial Planning Pty Ltd, AFSL 544118 and a member of the Association of Financial Advisers.

Financial Advice Sydney and the North Shore Office based in Lindfield NSW

Financial Services Guide - Disclaimer & Privacy Policy

^