The Superannuation Guarantee (SG) system—in conjunction with voluntary superannuation contributions and a means-tested, government-funded age pension—forms an integral part of Australia's retirement income policy.
As such, the committee is deeply concerned by recent analysis by Industry Super Australia that indicates that employers failed to pay an aggregate amount of $5.6 billion in SG contributions in 2013-14. The committee is keenly aware that this amount represents 2.76 million affected employees, with an average amount of over $2000 lost per person in a single year.
The negative impacts of non-payment of the SG are pervasive and affect several distinct groups: namely employees, employers and the government. Evidence received by the committee clearly indicates that a failure to adequately detect and address SG non-compliance causes long-term financial detriment to millions of Australian employees, significant competitive disadvantage to compliant employers, and an unnecessary impost to government finances through additional reliance on the age pension. In this regard, the committee is particularly concerned that the individuals most at risk of the negative impacts of SG non-payment often come from the most vulnerable groups in Australian society.
The committee is of the opinion that SG forms a vital component of an employee's remuneration. The committee strongly believes compulsory superannuation should be categorised as deferred wages that rightfully belong to an employee. While the non-payment of SG is immediately reflected in reduced superannuation balances, in the long term it also robs an employee of the benefits of investment earnings and compound interest. This is unacceptable.
The adverse economic impact of SG non-payment on employees is stark. Employees forego their rightful SG entitlements, leading to a loss of retirement income. This in turn lowers their standard of living in retirement and potentially increases their reliance on the age pension.
Additionally, the committee is concerned that employers who comply with their SG obligations must compete against non-compliant employers with an unfair competitive advantage. Without an effective suite of enforcement mechanisms compliant businesses may be incentivised to become non-compliant which would exacerbate the current situation.