Jason Low argues that Australia needs a much simpler super system that enables fair treatment across the board – removing the burden from businesses and instead empowering employees to take control of their finances
By now, you’ve all seen the articles on super. Is it a bird? Is it a plane? No, according to ATO (Australian Tax Office) it’s some employers using a loophole in superannuation to pocket the benefits of additional super contributions made by employees. Not quite so noble.
Why does this matter? Industry Super Australia has declared that the legal loophole for salary sacrificing delivers a $1 billion hit to the retirement savings of 360,000 Australians. Furthermore, two-thirds (61%) of those affected are earning under $80,000 per year. And, the average loss for a middle earner is $2,900 a year.
Whilst these figures are facing their own scrutiny, they demonstrate the significance of the super loophole. What’s more, statistics such as these have provided the foundations of a national outcry and calls for change by the government and employers alike.
But let’s get one thing straight. The ‘super-scandal’ is not a compliance issue and we do not need saving in the middle of the night. As employers choose to contribute to super at their own accord, this is an entirely moral dilemma. Do you a) add super onto an employee’s contract, b) bundle an employee’s package all together so that they must self-sacrifice or, c) make use of the loophole, combine the two and pocket the savings?
From a moral standpoint there are two clear options to choose from which will lead to a happy and productive workforce that you can engage with and retain. However, from a legal one, all three are entirely acceptable. I’m inclined to take sides with the law and say that ultimately it doesn’t matter. The missing link in all this is transparency. No matter what choice you make, you must be upfront with your employees about the part you will play in their future. Even if you are making use of the loophole you must ensure your employees are aware and encourage them to seek financial advice.
Super is a very complex issue. Therefore, we’re calling for employers to provide their staff with the means to understanding it. Many of us don’t have the means in-house to provide high levels of super support but we can all provide our employees with the transparency they need to get to the bottom of it. Through transparency and proactive financial guidance, perhaps through external support networks, businesses can provide their staff with the help they need to fully understand their super investments and the legislation that surrounds them.
Ultimately, no-one is a villain here. It all comes down to simplifying the rules and removing the red tape surrounding super funds. We need a much simpler system that enables fair treatment across the board – removing the burden from businesses and instead empowering employees to take control of their finances.
Whilst a loophole may exist in the system, it cannot and will not be removed, as salary sacrifice is a vital element of super saving. Instead of calling for its downfall, businesses need to prepare and empower employees to understand and fight for their super funds. Employers must show their commitment to this cause through dedicated training programmes and the sourcing of external financial advisors to help guide staff through the super maze.
About the author
Jason Low is Head of The Association for Payroll Specialists (TAPS)