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IPA: 'stop legalised wage theft'
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 superannuation guarantee (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 percent SG,” said IPA chief executive officer, Andrew Conway.
“To make things worse, employers can calculate SG obligations on a (lower) post salary sacrifice earnings base. 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," he said.
“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.
“In 2017, there was a Bill to fix this anomaly but it lapsed due to the election. The integrity measure is now part of a new Bill before Parliament, which will close the loophole," Mr Conway said.
“However, 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 said.
“This situation needs 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 percent, some employees will not be receiving the current 9.5 percent while this loophole exists."
About the Institute of Public Accountants
The IPA, formed in 1923, is one of Australia’s three legally recognised professional accounting bodies. In late 2014, the IPA acquired the Institute of Financial Accountants in the UK and formed the IPA Group, with more than 37,000 members and students in over 80 countries. The IPA Group is the largest SME focused accountancy organisation in the world. The IPA is a member of the International Federation of Accountants, the Accounting Professional and Ethical Standards Board and the Confederation of Asian and Pacific Accountants.
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