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FSC warns funds on SG recovery
Superannuation funds which seek to pursue employers for perceived non-payment of their superannuation guarantee (SG) obligations may, in fact, find themselves in breach of the sole purpose test, according to the Financial Services Council (FSC).
While generally supporting moves for greater superannuation guarantee (SG) compliance, the FSC sounded a note of caution with respect to superannuation funds taking it upon themselves to pursue the issue.
It used a submission to the Parliamentary Committee inquiry into SG non-payment to state that calls for superannuation funds to become actively engaged in enforcing SG compliance (where no actual debt was owed by an employer) should be carefully considered in light of the sole purpose test and, in particular, where a fund is public offer.
The submission said the FSC was concerned that funds that spend members’ retirement savings pursuing the potential underpayment of SG for other consumers, who may not even be members of the same fund or plan, may be difficult to justify under the sole purpose test.
“It may also create conflicts of interest where a related party of the trustee is used to pursue instances of perceived SG non-compliance,” it said.
The FSC submission said there might be a basis to argue that where SG non-compliance is evidently systemic across a fund’s employer-base then the fund could legitimately take action in relation to perceived non-compliance.
“Further, circumstances may arise where a trustee is under a contractual duty to recover amounts owing to it by employers. Under both of these circumstances it may be consistent with the sole purpose test for a trustee to undertake enforcement activities,” it said.
However, he said that most arrangements were not structured in this manner and that more commonly the employer commonly was under no contractual obligation to make payments of amounts to the trustee in respect of SG-style contributions for its employees.
“Rather, the trustee agrees to accept as employer contributions such amounts that an employer chooses to make in respect of such employees nominated to the trustee from time to time.”
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Disappointing position taken again by FSC if this article is accurate - blame the legislation for inaction rather than suggesting a fix.
FSC members are running a business. they are not running a trust for the benefit of members. Their business is reliant on the employer's goodwill and FSC members are conflicted if they start acting in the best interests of their members and seek to chase the employers who do not do the right thing. There are plenty of these employers as we know from the research and just by looking at the contribution history of family and friends relative to their monthly salary received.
FSC gives us yet another reason for Australians to move their superannuation accounts to those funds running a trust for the benefit of members and away from those funds running a business for the benefit of senior management and shareholders.
@Jeff
This has nothing to do with whether the Trustee is for profit or not.
Employers have a responsibility to contribute super on behalf of employees. Contributions should be mandated to be made at the same time the wages are paid to the employee. Then it is up to the employee to monitor the receipt of their superannuation into their nominated super fund. No different to tracking the payment of wages into your own bank account. Time for Australians to step up and take charge of their forgotten retirement savings instead of expecting large institutions to look after them.