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COMMENT

The Christmas superannuation swipe: 'Tis the season to look at your balance

Michael Pascoe

Christmas and Wednesday's summer solstice aren't the only events you can count on at this time of year.

There is also the plethora of Year 12 result stories and, soon, the extent of the January sales. But before it recedes with the season, it's worth marking this month's report about employers not paying the compulsory superannuation guarantee levy. 

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The seasonal unpaid super story

Some industry super funds believe 30 per cent of workers are missing at least some of their superannuation. Michael Pascoe comments.

The latest rendition added to what was already well known by boosting the suspected extent of dodgy employers not paying super. Industry Super Australia and Cbus reckon 30 per cent of workers are missing at least some of their superannuation.

That's a big step up from the Australian Tax Office's internal risk review last year that guessed somewhere between 11 and 20 per cent of employers could be non-compliant to a greater or lesser degree, and that non-compliance was endemic in small businesses and industries with lots of cash payments and contracting arrangements. 

As sure as there are lists of dangerous toys before Christmas, there will be another story about it next year because, despite the occasional talk, the politicians aren't prepared to do what's necessary to fix the problem.

There is a line that carries weight within the government than many employers need the working capital that's provided by delaying compulsory super payments. 

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So it's not news or a surprise that the present system of relying on employers to do the right thing clearly is not working for many people. Only the extent of the abuse is open to speculation, whether it's a lot or more than that.  

There are solutions to the problem, if government were interested. I've suggested in this space before that a particularly efficient one would be to have the ATO collect the super guarantee levy as part of the tax system.

The  individual's annual tax return would include a line to nominate the entity of choice to manage his or her super for the next 12 months – retail, industry or self-managed super fund. As the ATO collects tax, the super guarantee would be funnelled into the fund of choice.

With that in place, further enhancements could be easily achieved. A little actuarial study could determine the minimum amount required for a super fund to make sense, the point at which a young person's small contributions aren't gobbled up by insurance of dubious value and management fees, especially if the contributions go into a number of funds through various part-time jobs.

It would be a reasonable thing for the ATO to hold the individual's super in a no-frills account paying the government bond rate until it reaches the magic figure - $20,000 or $30,000 or whatever the funds can make as a legitimate case. 

Rather than waiting for individuals to wake up to their mistake of having numerous small superannuation accounts, the ATO could automatically (unless the individual opts out of the service) funnel the rats and mice into the largest of the accounts.

But it seems neither the retail nor industry fund lobbies like such ideas. They do best for themselves by relying on member inertia and the sweetheart deals in place to lock in contributions. In the nature of $2 trillion industries, the super funds become their own raison d'être. 

Both sides of politics have their friends and backers in the super industry to listen to, so it's a safe bet that the interests of the fund managers will be heard over what would be in the best interests of individuals.  

Oh well – at least it provides a regular, familiar story for media to trot out.

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