IPA calls for super to be aligned with PAYG
The Institute of Public Accounts (IPA) has called on the Government to reconsider proposed changes to superannuation in relation to fund notification requirements.
"It is unacceptable that employers should deny their employees their full superannuation entitlements, even if only a small number of employers. The Government needs to address this issue. However, the mechanisms proposed will be ineffective and costly to administer," said IPA chief executive officer, Andrew Conway.
Financial stress is the major reason why employers fail to pay superannuation entitlements to their employees. As superannuation payments are separate from PAYG deductions, employers have greater latitude to hold on to money that should be put in their employee's superannuation fund.
To address this concern the Government has proposed that superannuation funds report actual contributions received either quarterly or half-yearly. The expectation is that employees will notice any reduction in superannuation payments and contact the relevant regulator.
"This might sound simple in theory; however, it depends on employees being actually engaged in their superannuation. Research indicates that the majority of Australians are disengaged with superannuation. An email or SMS from your fund may not be sufficient to attract the attention of the employee," said Mr Conway.
For superannuation funds these new requirements will be expensive to implement and will mean additional effort in ensuring that all personal details, including email addresses and mobile phone numbers, are always up to date.
"As we believe the mechanisms will be ineffective, the regulations will merely increase the cost to funds and members without addressing the problem.
"There is an alternative; a simpler, lower cost and more effective mechanism. By aligning the requirement to pay superannuation payments with PAYG payments and having these payments made direct into the fund or a clearing house, the problem will be more effectively and efficiently addressed.
"Funds will not have to implement expensive changes. Employees will be assured their superannuation entitlements are paid and employers will have one less different payment period to worry about. Everyone wins," said Mr Conway.