The Superannuation Guarantee Charge (“SGC”) is the amount employers are required to pay in respect of their eligible employees when they fail to pay the required minimum to the nominated funds by the due date. SGC is comprised of superannuation shortfall amount, nominal interest and administration fee which becomes payable to the Australian Taxation Office (“ATO”).
The Fair Entitlements Guarantee (“FEG”) Scheme administered by the Department of Employment and Workplace Relations (“DEWR”) provides financial assistance for unpaid employment entitlements to eligible employees who lose their employment through insolvency of their employer. Upon payment of the entitlements, the DEWR stands in the shoes of the employee as a subrogated creditor and is entitled to claim in the liquidation as a priority creditor under the provisions of the Corporations Act 2001. It should be noted that FEG’s scheme does not cover payment of outstanding superannuation guarantee amounts.
The FEG’s Recovery Program (“FRP”), which is also administered by the DEWR provides funding to insolvency practitioners to fund recovery actions (subject to the merits) against various parties that may result in the recovery of amounts advanced to the employees under its FEG Scheme.
From 1 July 2024, FRP was recalibrated to also actively pursue unpaid SGC amounts owed by employers who have entered liquidation or bankruptcy where certain criteria are met (including where a FEG advance had been made to former employees). Whilst FRP may fund the recovery of SGC, the compliance and enforcement of employer superannuation obligations remain the responsibility of the ATO. It is anticipated that this measure will strengthen the recovery of unpaid SGC, complementing the ATO’s recovery actions and broader Government reforms to deliver better retirement outcomes for Australians.
In addition to the above, the Australian Government has introduced a law that classifies the non-payment of superannuation as wage theft in certain circumstances. This law came into effect on 1 January 2025 and forms part of the Fair Work Act 2009. From this date employers who fail to meet their superannuation obligations may face severe penalties, including fines and criminal charges. The law would allow workers not covered by a modern award or enterprise agreement that contains a right to superannuation to take direct legal action against the employer for recovery of unpaid superannuation.
The legislation aims to protect employees from unfair labor practices and to ensure they receive their lawful entitlements for retirement savings. Employers must understand that while superannuation constitutes a substantial financial commitment, the costs of non-compliance now potentially including criminal charges can far exceed those of adherence.
By understanding their superannuation obligations, employers can safeguard their business against inadvertent breaches and heavy penalties and/or imprisonment.
