Superannuation is a Guarantee, not an Optional Extra
Up until the mid-1980s less than 40 per cent of the working population had superannuation. That figure was even less for blue-collar workers and women; for them it was only around 25 per cent. This all changed in 1991 when Labor under Paul Keating, our great former Prime Minister and Treasurer, introduced the superannuation guarantee, a compulsory system of superannuation for Australian employees.
The superannuation guarantee is exactly what it says it is. It's a guarantee that superannuation will be paid to workers. It's not optional. It is a guarantee. It is not an optional extra. When it was introduced, it boosted coverage to 80 per cent of employees and, over the following decade, the coverage increased to 91 per cent of Australian workers.
Under current arrangements, employers are required to pay superannuation to employees earning $450 per month before tax and working more than 30 hours per week in a full-time, part-time or casual capacity. This requirement stands, regardless of whether an employee is under the age of 18.
It is also important to note employers' obligations as to workers over the age of 70. This is especially important, given this government's intent to change the retirement age. If employees aged over 70 pass a work test and work more than 40 hours in a 30-day period, their employers can still pay contributions.
It's pretty clear what your requirements are as an employer, which is why the figures provided by Industry Super Australia about the number of employers who are failing to pay their staff's superannuation are breathtaking. They're breathtaking and they're appalling. I reiterate: the word is 'guarantee', not 'optional extra'. The sheer amount that unscrupulous employers are ripping off Australian workers is absolutely unbelievable, and the Senate Economics References Committee agreed. According to the committee report:
… analysis by Industry Super Australia … indicates that employers failed to pay an aggregate amount of $5.6 billion in superannuation 'guarantee' contributions in 2013-14.
This amount represents 2.76 million people affected across Australia, with an average amount of over $2,000 lost per person in a single year. But the ATO disputed the amount put forward by Industry Super Australia, without actually being able to put forward its own figures.
There is a superannuation guarantee gap—and again I underscore that word 'guarantee'. The fact that employers are ripping off their workers is not in dispute. In fact, the issue has been raised in numerous reviews, dating back to 2001. In April 2001, the Senate Select Committee on Superannuation and Financial Services tabled their report Enforcement of the superannuation guarantee charge. This is the charge applied to employers who don't comply with their obligations to pay workers' super on time or pay the right amount. Even this report, 16 years earlier than the most recent Senate committee report into the superannuation guarantee, noted the same concerns as were raised in last year's inquiry: the ATO's 'apparent lack of activity in pursuing defaulting employers and addressing individual complaints'; the complexity of the superannuation guarantee system; and low levels of education among employers and employees about their superannuation rights and responsibilities—and I will come to that later.
A report released by the Inspector-General of Taxation in 2010 noted the same ongoing complaints about unpaid superannuation entitlements and frustrations of employees recovering unpaid amounts. In 2015, an ANAO report of an audit of the ATO's work in promoting compliance with the superannuation guarantee obligations showed that there was still work to be done—that the ATO could benefit from better targeting of compliance activities and could gain a greater understanding of the level of noncompliance with obligations across industry sectors and types of employers.
In 2016, there was another review—how many reviews are we up to now?—by the Inspector-General of Taxation into the ATO's compliance activities on the superannuation guarantee. But this report has not been released by the minister—and I am sure we can all guess why. Fast forward to the Senate Economics References Committee report from 2017, and not a lot has changed.
These warning bells have been ringing for years. We are going back to 2001, if not before. These warning bells have been ringing for years about the lack of compliance on the superannuation guarantee, and we are hearing them again from this Senate economics report. But enough is enough. There are already deterrents in place in the legislation. So, yes, these warning bells have been ringing about lack of compliance, but there are already systems in place to ensure that this is a superannuation guarantee and not an optional extra for employees. There are already deterrents in place in the legislation. The superannuation guarantee charge means that defaulting employers incur significant penalties and administration fees.
And yet there is still a gap in the superannuation of a significant number of Australian workers, and some of our most vulnerable workers are not being paid. A problem that still hasn't been addressed, 26 years on from the introduction of universal compulsory superannuation, is knowing which industries and which workers are most at risk of unpaid super. There is a significant data gap here and, to ensure this legislation that we're discussing today is effective, we need to know where the gaps are and who is falling through those gaps.
Dealing with underpayment of the superannuation guarantee wage theft—that's what it is; it is wage theft. It's not an, 'Oops, I forgot.' It's a guarantee; it's not an optional extra, it’s a priority for Labor. Which is why the 12-month amnesty this bill proposes is problematic. The bill provides a one-off 12-month amnesty to allow employers to claim tax deductions for payments of the superannuation guarantee charge or contribution made during the amnesty period to offset the charge, and to have the penalties and fees that may otherwise apply in relation to historical superannuation non-compliance reduced to nil. It's an amnesty for forgetting. It's an amnesty for not taking their responsibility to their employees seriously, for treating the guarantee as an optional extra.
The amnesty would cover non-compliance for the period from 1 July 1992 to 31 March 2018. That's a lot of, 'Oops'. It's a lot of, 'Oops, I forgot to pay superannuation for my workers.' That's a lot of wage theft. The minister considers this amnesty period to be a 'carrot' to address historical non-compliance. Let's take a look at the timeframes a little more closely —1 July 1992 to 31 March 2018. That is giving a free pass to employers who have ripped off their staff since the superannuation guarantee was introduced. Can you believe it? That's a lot of, 'I forgot to pay super.' That's a lot of, 'I forgot to actually treat this seriously.' That's a lot of, 'I forgot to treat this as a guarantee.' That's a lot of, 'Oops, my dog ate my homework.' Under this bill, employers who have ripped off staff—and that's what they have done, they have ripped off staff; this is wage theft—across the past 26 years will get a free pass. What part of that is okay? Twenty-six years of ripping off workers, of thieving their wages, and the employers are going to get a free pass. It's just breathtaking that people tend to think that that's okay.
In the same breath, the minister also talks about the 12-month amnesty having a 'stick'. Right. It will be interesting to see how effective that stick is given the fact that for more than 26 years people haven't taken the superannuation guarantee seriously. So we've got this stick approach after the carrot. The 'stick' is: if employers who could come forward during the amnesty period choose not to and are subsequently caught by the ATO, they could be subject to a 50 per cent penalty on top of the other penalties and charges associated with late payment of the superannuation guarantee. This particular measure needs further consultation. There are views from COSBOA, who support the amnesty, and there are views from the ACTU, who are against it, saying penalties should be increased and employers shouldn't be getting off scot-free. But what this bill fails to consider is the impact that underpayment of the superannuation guarantee has on some of our most vulnerable workers. Non-payment of superannuation impacts on total disability payments and income protection insurance payments that are attached to superannuation. Those most at risk are those on lower to middle incomes—the very people who are most reliant on compulsory superannuation contributions, and less able to make voluntary contributions to supplement their retirement savings.
According to the Association of Superannuation Funds of Australia, the average Australian woman retires with around half the super balance of the average man. Women live longer than men. Women earn less than men. These are all stories we know; these are all facts we know. Women take more time out of the workforce and, ultimately, retire with less superannuation. Women still bear the majority of unpaid caring and household responsibilities, and significant and increasing numbers of Australian women are ending their working lives facing financial hardship, facing poverty and, in some cases, even facing homelessness—and that is increasing.
The Equality Rights Alliance did a study a number of years ago about the fact that we are facing what they called a tsunami of homelessness of older women in the next decade. They are women who have worked all their lives, are on moderate wages and can't afford to buy a home, so they are in the private rental market. They're usually divorced, they usually have brought up kids on their own and they have very, very little super. We're talking about $40,000 or $50,000 of superannuation. Their retirements look very, very bleak. I know because I speak to these women whenever I make a speech on financial literacy and superannuation.
Whenever I make a speech on those two issues, at the end of the session women who are invariably in their mid-50s to mid-60s come up to me in tears—always in tears—saying, 'You've just told my story – “I am absolutely terrified about my retirement. “I am absolutely terrified about ageing. “I am absolutely terrified about my future. I have very little super. I will need to go onto the age pension. I'm in the private rental market.' They're earning too much to get social housing, they have next to zero in savings and their future looks incredibly bleak. Imagine staring down that reality at the end of your working life when you've brought up kids on your own, you've done it tough financially, you've tried as hard as possible to get that superannuation together and make those contributions to superannuation and you're struggling to pay rent in the private market. Imagine what a future looks like for a woman who has gone through all that. She has worked all her life and brought up her kids on her own, but here she is, staring down a future of being on the age pension, having very little in her super account and being in the private rental market. It doesn't look that rosy. It is very bleak, which is why these women are invariably in tears and frightened out of their wits. They are absolutely frightened about their futures. Addressing those women and the bleak futures that they have is another issue. The situation, like so much related to homelessness, is quite complex.
The message I also convey when I'm speaking to these women is that “A man is not a financial plan.” A man is not a financial plan, women, sisters—I encourage you to grip up your finances and to actually get an understanding about what's going on in your bank account and what’s going on in your superannuation account. Yes, it's complex. Superannuation is mind-bogglingly complex. I know that when I set up my own small business, I moved from the public service super and had to go and look for my own super supplier. I ended up in an industry fund because Money magazine showcased the fact that industry funds were the best-performing funds in Australia, so that's where my money went. And through that process, Deputy Speaker, I gained a greater understanding of superannuation and how it worked and taking charge of the mix, the investment mix. I do encourage women of Australia: a man is not a financial plan. Please, get an understanding of your bank account; get an understanding of your superannuation account. A lot of women say to me, 'It's all too hard.' Well, retirement with no money in the bank while paying for private rental on the age pension is very, very hard. That's the future that you could potentially face if you don't actually deal with this issue and get literate and remember - A man is not a financial plan.