Australia’s $4bn Super blackhole impacting self-employed most
While a recent research report has predicted that the ATO’s crackdown on SG non-compliance will be effective in improving the payment of super to employees, the lack of super savings among the self-employed is expected to remain a critical issue.
As part of a recent research report, Mercer has estimated that around 935,350 of Australia’s workforce, including those that are self-employed, do not receive any kind of super, accounting for an annual $4 billion deficit in super savings.
Out of this total number, it estimated that around 400,000 Australian salaried workers have not been paid superannuation entitlements.
The estimates were based on a small sample file of tax and superannuation data from the ATO’s records for 2015–16.
The analysis was based on working Australians earning more than $8,000 per year who did not make any superannuation contributions or did not have contributions made on their behalf by an employer during the 2015–16 financial year.
The report estimated that around one in 11 workers are not paid super, while two in three self-employed do not receive any kind of superannuation payments.
It noted that the ATO has been playing a significant role in ensuring that workers are paid the minimum SG rate and has implemented a number of measures to improve compliance by employers.
“A new reporting mechanism for APRA-regulated funds, known as the Member Accounts Transaction Service (MATS), was recently introduced. Contributions for each member will be recorded and reported to the ATO at the time they occur rather than annually,” it said.
“The subsequent use of data analytics to, for example, match contributions with reported salary and PAYG tax will help improve their compliance activity.”
The ATO, it said, has also made changes to improve employees’ visibility regarding their entitlements and payments, through online services and myGov.
“All these are positive moves that will ensure better compliance of SG by employers,” the report stated.
While the ATO-led crackdown on recalcitrant employers will improve the plight of salaried workers, the self-employed remain vulnerable in terms of not receiving any super.
“The debate about legislating to force the self-employed into Australia’s superannuation system remains ongoing. Many self-employed individuals run small businesses and prioritise cash flow and re-investing into their business over saving,” it said.
“Many also believe their business will be their retirement nest egg, but that is certainly not guaranteed.”
Mercer suggested in the report that policymakers could look to the scheme used by Finland which requires self-employed workers to provide an annual wage earnings estimate, upon which pension contribution calculations are made, rather than the value of their business.
“Adopting a similar model to bring the self-employed inside the regulatory environment will provide a retirement safety net and ensure they exit the workforce with savings,” it said.
“This could be achieved by extending the SG payment to cover the self-employed, at a reduced rate initially, such as 3 per cent, to avoid a sudden and a hefty impost.”
Miranda Brownlee
12 April 2019
smsfadviser.com
Latest Newsletters
Hot Issues
- Aged care report goes to the heart of Australia’s tax debate
- Removed super no longer protected from creditors: court
- ATO investigating 16.5k SMSFs over valuation compliance
- The 2025 Financial Year Tax & Super Changes You Need to Know!
- Investment and economic outlook, March 2024
- The compounding benefits from reinvesting dividends
- Three things to consider when switching your super
- Oldest Buildings in the World.
- Illegal access nets $637 million
- Trustee decisions are at their own discretion: expert
- Regular reviews and safekeeping of documents vital: expert
- Latest stats back up research into SMSF longevity and returns: educator
- Investment and economic outlook, February 2024
- Planning financially for a career break
- Could your SMSF do with more diversification?
- Countries producing the most solar power by gigawatt hours
- Labor tweaks stage 3 tax cuts to make room for ‘middle Australia’
- Quarterly reporting regime means communication now paramount: expert
- Plan now to take advantage of 5-year carry forward rule: expert
- Why investors are firmly focused on interest rates
- Super literacy low for cash-strapped
- Four timeless principles for investing success
- Investment and economic outlook, January 2024
- Wheat Production by Country
- Time to start planning for stage 3 tax cuts: technical manager
- Millions of Australians lose by leaving savings in default MySuper funds
Article archive
- January - March 2024
- October - December 2023
- July - September 2023
- April - June 2023
- January - March 2023
- October - December 2022
- July - September 2022
- April - June 2022
- January - March 2022
- October - December 2021
- July - September 2021
- April - June 2021
- January - March 2021
- October - December 2020
- July - September 2020
- April - June 2020
- January - March 2020
- October - December 2019
- July - September 2019
- April - June 2019
- January - March 2019
- October - December 2018
- July - September 2018
- April - June 2018
- January - March 2018
- October - December 2017
- July - September 2017
- April - June 2017
- January - March 2017
- October - December 2016
- July - September 2016
- April - June 2016
- January - March 2016
- October - December 2015
- July - September 2015
- April - June 2015
April - June 2019 archive
- Recession on our mind
- What it will take to close the super gap between men and women
- Australia - How are we going as 2018-19 ends?
- LRBAs, guarantees in need of review after property market falls
- Average age for establishing SMSFs sitting at 48.9: Report
- ATO updates valuation guidelines for pension reporting
- ATO figures show jump in starting balances for SMSFs
- Your personal financial register
- Australia’s $4bn Super blackhole impacting self-employed most
- The proper help can be a benefit - age pension
- SMSFs on ATO’s radar in cryptocurrency review
- Limited recourse borrowing arrangements - LRBAs
- What a financial planner does to help.
- Goodbye to ad-hoc portfolios
- Wanted: More voluntary super contributions
- Australia by the numbers – May Update
- Federal Budget 2019 - Overview
- How the 2019 Federal Budget affects you
- The problem with getting to 53 years of age.
- Paying for health care in retirement
- Personal super contributions and the 10% test
- What investors can expect as key moves affecting markets await
- ATO flags PAYG obligations for SMSFs with legacy pensions
- Don't just plan for retirement; Plan for your life
- Consumers misunderstand types of advice
- Budget Time - How's Australia going?