Unpaid superannuation guarantee (SG) contributions should become part of the Government’s Fair Entitlements Guarantee (FEG), according to the Association of Superannuation Funds of Australia (ASFA).
ASFA has used its pre-Budget submission to argue for inclusion of the SG in the FEG, estimating that it would add just $150 million a year to the Budget with around 55,000 a year benefitting.
The ASFA submission suggested that including the SG in the FEG would be timely in circumstances where corporate insolvencies were likely to accelerate as a result of the impacts of COVID-19.
“There have been a number of high profile cases in recent years, including restaurant groups, where businesses have become insolvent and there are unpaid superannuation contributions,” it said. “While the provision of JobKeeper payments to businesses that have experienced a downturn in revenue have kept many businesses solvent, once the JobKeeper program ceases there is likely to be a substantial increase in the number of insolvencies. This is likely to be particularly the case for Victoria, where the reintroduction of an extensive range of restrictions has meant that many businesses will have no trading revenue for an extended period of time.”
“Changes to reporting requirements for employers and superannuation funds have given greater visibility for the Australian Taxation Office to unpaid employer contributions and greater attention is being given to contributions in arrears. However, it is likely that there will be continuing cases where there are unpaid contributions when businesses become insolvent. Greater visibility to unpaid employer contributions will be of only limited assistance where the employers do not have any financial capacity to pay given COVID-19 impacts on their businesses.”
“In ASFA’s view, there is merit in reviewing the treatment of unpaid SG entitlements in insolvency/bankruptcy, with the objective of considering how to achieve the maximum possible recovery on behalf of affected employees. ASFA estimates that on a regular ongoing basis it would cost around $150 million per year to include unpaid SG in the FEG, with around 55,000 employees a year benefitting. In 2021- 22 as a result of COVID-19 related insolvencies the figures might be more like $600 million and 220,000 employees.”