Quantcast
Subscribe to our newsletter
Calls for government to stop legalising wage theft

Calls for government to stop legalising wage theft

The IPA has called on the government to rectify a loophole in the superannuation guarantee (SG) rules that caters to wage theft. 

  • Maja Garaca Djurdjevic
  • August 07, 2019
share this article

The Institute of Public Accountants (IPA) has called for immediate action to stamp out wage theft that can occur because of a loophole in the SG rules.

Currently, where an employee salary sacrifices into his or her superannuation, an employer can use that additional contribution to form part of the employer’s obligation to pay the 9.5 per cent SG.

Employers can calculate SG obligations on a post salary sacrifice earnings base, which means that employees who salary sacrifice to boost their superannuation savings may end up with lower superannuation contributions than they expect.

“We would hope that most employers do the right thing by their staff but while this loophole exists, wage theft can continue to take place, potentially without detection,” said IPA chief executive officer, Andrew Conway.

“We suspect that many look at their annual statement, see that the balance has risen (due to other factors such as investment incomes) and then file it away without checking the detail.”

The integrity measure is now part of a new bill before parliament, which should close the loophole, after an earlier bill proposing to fix the anomaly lapsed in 2017 due to the election.

Mr Conway however warned that even if the bill is passed, the start date is not until 1 July 2020. 

“The explanatory memorandum to the bill does not explain why the measure has a delayed start date presumably allowing those who use the loophole to adjust their business practices.

“When someone undertakes a salary sacrifice into superannuation they are attempting to provide sufficient savings to live more comfortably when they retire. They are sacrificing spending money today to build their nest egg which is a good thing as it means less reliance on government support in retirement.

“No one would undertake such a strategy if they knowingly knew that their hard-earned dollars were being used to offset their employer’s SG obligations. It’s counter intuitive to think otherwise,” Mr Conway explained.

He called for the situation to be rectified as quickly as possible to cease the opportunity for potential wage theft. 

“It’s ironic that whilst we are discussing an SG increase to 12 per cent, some employees will not be receiving the current 9.5 per cent while this loophole exists,” said Mr Conway.

Receive the latest Public Accountant news,
opinion and features direct to your inbox.

related articles