Don't jail employers for unpaid super
Twenty years on, the government has finally taken the non-payment of compulsory superannuation seriously, including by the possibility of prison sentences for serious offenders. How effective this action will be, especially in ensuring struggling employers and participants in the cash economy comply, remains to be seen.
In many cases, participants in the cash economy are only too keen to miss out on compulsory super contributions to avoid paying income tax on their earnings.
For younger and financially stressed families, the attractions of receiving employer super contributions have been greatly reduced by changes restricting access to superannuation benefits until at least age 60. Despite the current review of the provisions granting emergency access to a small component of accumulated super assets, the prospect is for even more restrictions on accessing super until retirement.
Compounding the problems of achieving effective compulsory super arrangements is that the legislation applies only to employers paying wages to employees. There are no requirements on self-employed people or non-working investors to make compulsory superannuation contributions.
Apart from the difficulty of defining whether contractors are employees or self-employed, the current focus on compulsory super only for employees means that a significant percentage of the population will reach retirement with little or no super.
Jailing employers who don't meet their compulsory super obligations will do little to improve overall superannuation coverage. Struggling companies facing severe penalties may even be forced to shut down or shed workers much earlier than they currently do.
Requiring all taxpayers of working age to contribute a specified percentage of their gross taxable income, including any employer super contributions received, would be a much more effective means of maximising superannuation coverage. To the extent that employers don't make contributions, taxpayers would be forced to make up the contributions from their own income.
Under such an arrangement, the Tax Office would still face the problem of dealing with the cash economy which in any event deserves a higher priority than ensuring the payment of compulsory super to wage earners.
At a personal level, monitoring employer super contributions regularly to ensure payments are being made will remain a top priority. Early knowledge that there could be a problem will make dealing with an employer easier than when there has been a more serious breach. The harsher penalties will increase the pressure on employers to comply but doing this could result in a reduction of future employment opportunities.