The increase in the superannuation guarantee (SG) should continue as legislated as the COVID-19 related reductions in employment had disproportionately impacted the young and those on lower incomes, according to the Association of Superannuation Funds of Australia (ASFA).
In its Budget submission, ASFA recommended the SG be gradually increased to 12% as the majority of applications of the early release of super scheme were under 35 and while they had a substantial period of years before retirement, they would miss out on the benefits of the compounding of investment returns over many years.
ASFA also recommended the Government amend the current legislative framework to include dependent contractors within the scope of the SG.
It said as the rise of the gig economy lead to shifts in the structure of the labour markets, a larger proportion of people had some form of independent work arrangements, such as independent contracting, where workers were generally not covered by the SG.
The super body also recommended that unpaid SG entitlements be included in the definition of unpaid employment entitlements for the purposes of Fair Entitlements Guarantee.
ASFA said while JobKeeper payments were helping keep businesses solvent, once the program ceased there would likely be a substantial increase in the number of insolvencies.
“… itis 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,” the submission said.
“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.”
The super body also reiterated that the $450 super threshold be removed and proposed measures to improve the productivity of super administration.
The measures proposed were:
- Change the default communication medium from paper to electronic;
- Make advice more accessible and affordable for members;
- Centralise data reporting by funds rather than having reporting to multiple agencies and departments;
- Address issues inhibiting superannuation fund mergers;
- Make it easier for members to make a contribution and to claim a tax deduction; and
- Ensure greater stability in policy settings.