Unpaid super bill blows out by $500 million ahead of much-needed payday super laws

New analysis of recently released ATO data by the Super Members Council shows unpaid super is now costing Australians $6.3 billion each year in lost retirement savings – a $500 million increase on the previous year.

The findings underline the importance of payday laws that come into effect today which require employers to pay super at the same time as wages instead of only once every three months.

“Unpaid super is on the rise, cutting billions of dollars each year from Australians’ retirement savings and highlighting why payday super laws are very much needed,” says the Council’s CEO Misha Schubert.

The Council’s analysis shows that more than one in four workers (28%) were underpaid an average of $1,850 (up from $1,730 the previous year) in 2023-24.

This means around 3.4 million workers aren’t being paid some or all of the super what they are owed, potentially leaving some more than $30,000 worse off at retirement due to the loss of compounding investment returns.

The Council’s analysis also found (see table below for further state-based analysis):

• Underpayments in NSW surpassed $2bn.
• The ACT had the highest average underpayment ($2,360), but also the lowest percentage of underpaid workers (20%).
• NSW and West Australia both had the highest percentage of workers who had been underpaid super (both 29%).

Payday super will be a gamechanger for tackling unpaid super, with more than 70% of Australians in a recent survey agreeing it will help them keep track of whether their employers are paying their super correctly, and more than half saying they will now check their super more regularly.

The Council has long championed payday super laws as a key reform to help stamp out unpaid super, coupled with more proactive recovery of unpaid super by the ATO.

Unpaid super disproportionately hurts vulnerable groups. Among the hardest hit workers from unpaid super are women, who already retire with a quarter less super than men.

Younger workers, and low-income earners are also at risk: one in two workers who earn less than $25,000 a year have unpaid super entitlements.

The new laws will also make it much easier for employers to stay on top of their cashflow and worker entitlements - and will level the playing field for all the businesses already doing the right thing by their staff.

The Australian Taxation Office has said it will adopt a graduated approach to enforcement as businesses transition to the new system in the first 12 months, focussing its resources on areas of highest risk.

With digital payroll and single touch payroll reporting systems now available to all employers, around 40% of businesses already pay super more frequently than quarterly.

ATO data shows that since payday super was announced, around 19,000 more employers are paying super more frequently than quarterly – a 2.4 percentage point increase in the share of employers doing so.

“Payday super will not only help to stamp out unpaid super – it could put more than $9,000 more in the average Australian worker’s pocket at retirement, thanks to more frequent payments and the power of compounding.”

“For employers making this transition, we appreciate the scale of the task and that’s why we support the ATO’s graduated approach on enforcement in the first 12 months.”

Table – Unpaid super by state in 2023-24

Source:  SMC analysis of ATO 2% confidentialised tax sample file, 2023-24.