Last week Labor introduced its closing loopholes bill, which could see dodgy bosses fined millions of dollars or face prison terms for wage theft.
But while deliberately underpaying workers is set to be a crime, the bill says nothing about the non-payment of superannuation.
Back in April the assistant treasurer, Stephen Jones, said the failure to pay super should be treated “in the same way as wage theft”. The Albanese government also agreed with a Senate inquiry that recommended the new offence should apply to all forms of remuneration, including superannuation.
Industry Super estimated that in 2018-19 employers failed to pay $5bn a year of super, meaning the one quarter of employees affected are out of pocket on average $1,700 a year. The ATO estimated 4.9% of super was not paid in 2019-20, or $3.4bn.
Big bickies, especially decades later in retirement.
The unpaid super bill dwarfs the $915m a year the closing loopholes bill is estimated to earn for labour hire and gig economy workers.
The construction union’s national secretary, Zach Smith, thinks while criminalising wage theft nationally “is an important first step”, unpaid super should have been “included in this bill, but if not it should be included in future changes to wage theft laws”.
So why was super not included? According to an employment department spokesperson, “criminal offences already apply in relation to non-payment of superannuation”.
In fact, the direct consequences of failing to pay super are not criminal, they involve penalties of up to double the amount of unpaid super.
In April 2019 the ATO gained the power to issue “directions to pay” super. Failure to pay one of those is a crime punishable by a $15,650 fine or 12 months in prison or both. But here’s the thing: the ATO has never issued a direction to pay.
The ATO said that “during the pandemic” it “paused most of our firmer debt collection actions … and as a result we have not yet issued a DTP notice”.
The ATO had these powers for nine months before Covid-19 arrived in Australia, and “firmer” actions resumed 12 months ago. Still, no directions to pay.
Since failing to pay super is not itself a crime, there have been no prosecutions and no criminal penalties. The amount of super the ATO recovers every year and associated penalties are in the hundreds of millions, not billions.
The Industry Super Australia deputy chief executive, Matthew Linden, warns that “a penalty regime is only as effective as the regulator’s willingness to enforce it, and in the case of unpaid super the ATO has strong penalties and powers at its disposal that it has shown a historical reluctance to apply”.
“The ATO dismally only recovers about 15% of unpaid super in a year, and while it has shown a recent willingness to better tackle unpaid super, its compliance activity still falls well short of acting as an effective deterrent. It must better apply its powers and penalties to reduce unpaid super.”
On Wednesday the ATO commissioner, Chris Jordan, noted “a growing number of profitable businesses who have the capacity to pay their bills but are choosing not to”.
“Businesses appear to be de-prioritising payment of tax and super.”
Jordan said this was “concerning” and “not acceptable”. On Thursday the deputy commissioner, Vivek Chaudhary, said “we are serious about collecting unpaid super”.
But so far there’s a lot of huffing and puffing and not a lot of blowing the house down.
The Albanese government hopes the scourge of unpaid super will be reduced by payday super reforms, essentially requiring employers to pay super at the same time as wages.
Unions and industry super hope this reform and the inclusion of super in the national employment standards which gives workers more legal options to recover unpaid super debts, will fix things. But payday super won’t be in place until July 2026.
Smith said that non-payment of superannuation “disproportionately” hurts migrant workers, suggesting employers are “doing this deliberately, cynically targeting the most vulnerable workers out of confidence they’ll get away with it”.
“Let’s be clear: bosses that engage in this sort of egregious theft from workers’ retirement savings should go to jail and cop massive fines.
“Deterrence is key to stopping disgraceful corporate criminals stealing from workers.”
Deterrence is one issue. Another is restitution: how do we get the billions of unpaid super workers have already been dudded back?
Which leads us to another loophole. At the moment the unpaid wages safety net, through which the government steps in and pays out of pocket employees of bankrupt or liquidated companies, only applies to wages, leave and redundancy pay. Not super.
Linden said “the amount of unpaid super entitlements due to insolvencies is four times larger than that of wages” so super should go into the safety net. More big bickies.
Labor’s 2021 national platform stated that super should be included in the safety net. Curiously, the draft platform circulated ahead of the 2023 conference removed super but left the promise to “develop further mechanisms to protect workers’ superannuation in the event of corporate collapse”.
In the end, the Construction, Forestry, Mining and Energy Union forced super back into the platform. Migrant workers also aren’t covered, and Labor has promised to fix this as well. But there’s no public commitment about when the government will legislate either of these promises.
Labor’s industrial relations bill aims to fix loopholes in the gig economy, labour hire, and insecure employment.
But when it comes to criminal penalties and backpay for out-of-pocket workers, it seems the biggest loophole – the unpaid super swindle – is yet to be closed.
