A new report on Australia’s persistent unpaid superannuation problem reveals that the $5 billion-a-year issue continues to deny millions of Australians the full benefits of one of the world’s leading superannuation systems.

While most businesses adhere to their super obligations, legislative reform is urgently needed to prevent unscrupulous firms from undercutting competitors by failing to pay full super entitlements. The latest analysis from the Super Members Council (SMC) - the non-partisan peak body representing 11 million Australians with retirement savings in profit-to-member super funds - highlights the scale of the problem and underscores the necessity of immediate legislative action and stricter compliance measures.

To ensure that Australians receive their super on time and in full, SMC is calling on the Australian Government to implement three key measures: legislate that super must be paid on payday, set recovery targets for unpaid super for the Australian Tax Office (ATO), and provide stronger support for workers to claim their super following insolvencies.

Key findings from the SMC Report on unpaid Super:

• In one year alone, 2.8 million Australians were deprived of $5.1 billion in legal super entitlements (2021-22).
• Over nine years, Australians have missed out on a staggering $41.6 billion in unpaid super.
• The average affected worker lost $1,800 in super in a single year—potentially leading to a shortfall of over $30,000 in retirement savings for a typical worker.
• The issue is worsening, with Australians losing more money at a higher average.

Figure 1 Total amount of unpaid super by financial year

The new analysis, based on a two percent sample of ATO tax files, also reveals that women, those in insecure work, migrant workers, and younger employees are disproportionately affected by unpaid super. Workers in their 20s earning less than $25,000 a year face a one in two chance of being underpaid their super.

A significant contributor to unpaid super is an outdated system that permits super payments to be made quarterly. This misalignment between wage and super payment schedules makes it challenging for workers to track underpayments and hinders the ATO's ability to effectively utilize real-time monitoring tools.

In a positive move, the Australian Government has committed to enacting payday super reforms by 2026. However, legislation has yet to be introduced to Parliament, and details on the design and implementation of the reform remain unclear.

SMC CEO Misha Schubert emphasised the urgency of enacting the promised reforms within this parliamentary term to give businesses the necessary time to plan. She urged swift progress on stronger legislation to ensure millions of Australians receive their super.

“Paying super on payday will modernise the super system and should hugely reduce underpayments. It’s an excellent example of reform to benefit super fund members, which will make super fairer for workers and employers alike,” Ms. Schubert said.

“Unpaid super locks too many Australians out of the full transformative benefits of the retirement system and leaves people poorer when they retire. A unified push is needed to stamp it out.”

The Government has also yet to establish unpaid super compliance and recovery targets for the ATO, despite committing to this in 2022. While the ATO has increased its compliance efforts, it still only recovers an average of 15 percent of the nation’s unpaid super each year.

Unpaid super often comes to light when businesses collapse, highlighting the need to extend the Government’s Fair Entitlement Guarantee - a compensation scheme of last resort for workers - to include superannuation.

“Legislation to enforce payday super payments, combined with a stronger ATO enforcement regime and enhanced support for workers claiming their super after insolvencies, is essential to ensuring that millions of Australians currently being short-changed receive their super in full and on time,” Ms Schubert added.

“We stand ready to work with the Government, Parliament and other key stakeholders to enact these pivotal reforms and ensure Australia fixes the stubbornly persistent unpaid super problem.”

The Super Members Council remains a steadfast non-partisan advocate for the 11 million Australians with retirement savings in profit-to-member super funds.

Figure 3. Number of people underpaid their full super entitlements by financial year

Figure 4. Average underpayment per affected