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Economics Legislation Committee

MITCHELL, Mr Joseph, Workers' Capital Organising Officer, Australian Council of Trade Unions


CHAIR: Welcome. Thank you very much for appearing before the committee today, Mr Mitchell. I invite you to make a brief opening statement, should you wish to do so.

Mr Mitchell : Thanks for having me here today. The superannuation guarantee amnesty in this bill is an insult to workers whose retirement savings have been decimated by rogue employers. This bill outlines a plan to forgive the employers who have illegally ripped off workers and offers them a tax deduction for the trouble of paying their original obligation. The fact that this amnesty is being considered reveals that the government has no plans to address superannuation theft prior to the bill's introduction.

Stolen superannuation is rampant. According to Industry Super Australia modelling, workers lose about $5.6 billion per year in unpaid superannuation, which adds up to more than $60 billion over 10 years. The new figures from ISA show that 2.98 million workers have had their superannuation stolen by their employers. This bill will allow an amnesty for employers who have not paid superannuation since the establishment of superannuation more than 25 years ago. The amnesty is a worse insult to those who have retired with little to no superannuation because they've been ripped off.

In their submission to the Senate Economics References Committee inquiry into wage theft and noncompliance with the superannuation guarantee the then CFMEU highlighted an example of a steel fixer, Bill, whose name we've changed for privacy. He was 46 and worked for 10 years earning about $100,000 per year. Bill discovered he had a superannuation balance of $12,000. He worked his entire career with a promise that his deferred wages through superannuation would afford him a dignified retirement. Many of his previous employers are now out of business and, at the time of writing, the union deemed it unlikely he would be able to recoup his entitlements.

The MUA outlined the effect of unpaid super by rogue employers. In February 2012, Seawest International purchased a port in Port Hedland, Western Australia, from Svitzer Australia. At this time, approximately seven employees were transferred from Svitzer to Seawest. Seawest employed around 16 workers. From February 2012 to November 2013, the superannuation guarantee contributions were paid only intermittently and no superannuation had been paid at all since November 2013. The MUA estimates the total value of nonpayment to be $800,000, an average of $50,000 per employee, excluding additional charges and penalties. The employees and the MUA approached the company director several times over the last three years about the unpaid superannuation to no avail. MUA is aware that several employees have been attempting to recover the unpaid superannuation via the ATO. Many of the employees have also sought the assistance of an accountant in a superannuation fund. Rather than help these workers, the government is offering a potential amnesty to their employer. These workers have been living with the effects of their employers' theft, and to offer the amnesty robs workers of any justice.

Ignorance is not a defence in any other part of the law. But, in spruiking the law, the Minister for Revenue and Financial Services stated, on stolen super, some is inadvertent or the result of poor payment systems, often by stressed-out small-business employers. The superannuation guarantee has been in place since 1 July 1992. No business can claim ignorance of their obligation to pay superannuation. This gets to the heart of the double standard of the bill. If a worker were to steal from their employer, they would face jail. People receiving Centrelink payments are told to prove their earnings from up to six years ago. Dodgy employers get a free kick.

The amnesty should be scrapped. In its place the government should implement real reforms that empower workers and their representatives to inspect employers' records of payment of the SG, empower workers and their representatives, such as superannuation funds or unions, to take action against employers for the nonpayment of-the-superannuation guarantee or superannuation contributions.

The superannuation guarantee should be included in the national employment standards so that workers currently falling through the gaps are entitled to the superannuation guarantee and all workers should be entitled to superannuation, regardless of their method of employment. SG should be paid at the same time as wages and shown on a remittent advice with workers' contributions. The ATO and the Fair Work Ombudsman must be properly resourced to proactively pursue unpaid super.

CHAIR: Thank you, Mr Mitchell. I have a couple of questions for you. First of all, we've heard—you didn't mention these numbers, I don't think—that the amnesty will secure about 50,000 employers more than $200 million in unpaid super, which would otherwise go completely unpaid. Does the ACTU consider punishment of employers is more important than securing the retirement and savings of those employees?

Mr Mitchell : I don't think it's an either/or choice. I don't think that the amnesty is the right way to go about this. You wouldn't offer an amnesty for wage theft. You wouldn't offer an amnesty for stealing from the till, so offering an amnesty for superannuation is simply unjust.

CHAIR: You acknowledge though that, as our previous witnesses have suggested, often, unpaid superannuation is not a function of an unscrupulous employer but an oversight, a misunderstanding, the complexity of the system or extenuating circumstances. For those employees, it would be much better to have the money in their pockets, by using this amnesty, by using the carrot as opposed to the stick?

Mr Mitchell : The penalties that the ATO can apply are already able to be waived at the discretion of the commissioner. With the reforms that the ACTU proposes, including empowering workers, their unions and their superannuation funds to work with employers to recover unpaid superannuation, those are ways in which we can recover that money. An amnesty is simply unjust.

CHAIR: So if I were a member of the ACTU and I had had my superannuation unpaid or overlooked or whatever it was by my employer, and this particular piece of legislation would give me a much better chance of having that money in my pocket within the next few months—rather than going through legal processes of punishing employers, which could take years—don't you think I, as an ACTU member, would be better off having that money in my pocket, in my fund, earning compound interest as quickly as possible?

Mr Mitchell : I don't think that that's the choice. The situation you've outlined is a person who's a member of a union who has had their employer steal their superannuation from—what?—five or six years ago.

CHAIR: I didn't give a time frame.

Mr Mitchell : Regardless, that person should be entitled to the same actions that are undertaken through the recovery of wages—that is, entitlement to representation so that they can work with their employer to recover that unpaid super.

CHAIR: Do you accept the assertion that the amnesty period will lead to more employers beginning to demonstrate ongoing compliance with their superannuation guarantee obligations even after the amnesty is over?

Mr Mitchell : I don't accept that. It is very easy to get away with unpaid super. I don't see why anyone would take up the amnesty because, at the moment, you are at little to no risk of being caught. The fact that the amnesty is being offered means that—

CHAIR: You don't think that most people want to do the right thing?

Mr Mitchell : I don't think that there is any incentive for them to pay their unpaid super. They've already stolen the money—

CHAIR: You don't think that most employers want to do the right thing by their employees?

Mr Mitchell : I won't say that but I just don't think that there's any incentive in this bill that allows for employers to pay their historic unpaid super.

CHAIR: This is the carrot, isn't it? The stick is—in fact, 11 or 12 or so days ago you were here, in front of this very committee, discussing the superannuation guarantee integrity bill that the government introduced into parliament in March. The ACTU are of the view that giving the ATO more powers and enforcement tools, including the ability to apply jail terms to employers for up to 12 months if they continue to refuse to pay their employees' superannuation, is not an appropriately serious response to superannuation guarantee noncompliance. Is that correct?

Mr Mitchell : The measures outlined in that bill, as we discussed a couple of weeks ago, aren't going to get to the heart of the problem. There are serious, glaring omissions in what an employer is required to report to the ATO.

CHAIR: So that's an inadequate stick and this is an inadequate carrot. Is that what you're suggesting?

Mr Mitchell : I'm saying it's an adequate stick and an unjust carrot.

CHAIR: Page 4 of your submission says that the amnesty hurts most those employees who are facing retirement. But, surely, the amnesty will increase the likelihood of employers coming forward with unpaid super; therefore the amnesty will greatly benefit those nearing retirement who might have otherwise missed out on this super altogether?

Mr Mitchell : The ability to make forward planning as you approach your retirement is contingent upon your superannuation balance. If you discover your employer hasn't paid superannuation over the past 26 years, you're facing a retirement where you can't plan for anything other than the age pension or, perhaps, something incredibly modest compared to what you're entitled to. Where it impacts most are those people who are in retirement, who have been living with their meagre savings. There's no justice for them in offering their previous employers an amnesty and a tax deduction for recovery of what was originally their wages.

CHAIR: What do you think is more important, employees having their superannuation paid in their funds and earning compound interest or justice?

Mr Mitchell : I don't think that's an either/or situation. Employees receiving their superannuation funds is justice.

CHAIR: That's exactly right.

Mr Mitchell : Yes.

CHAIR: I think we're in vehement agreement there, Mr Mitchell.

Mr Mitchell : Fantastic.

Senator KETTER: Did the government inform you, at any point, before the introduction of this bill that it was planning to adopt an SG amnesty?

Mr Mitchell : No. We were very surprised to read a speech to parliament by the Minister for Revenue and Financial Services introducing this bill and were outraged that there is this bill on the table which will give employers a free pass for not paying their employees' superannuation.

Senator KETTER: Are there other occasions where the government hasn't consulted you about employment related legislation?

Mr Mitchell : I don't know that, but I'd be surprised.

Senator KETTER: You are the biggest representative of employees. So what does this say about the government's approach on this issue?

Mr Mitchell : Simply that they're putting the employers first. This bill is about relieving an obligation or a set of obligations for employers and relieving what would be just punishment for those people who haven't paid their superannuation. It's putting a priority on employers who have done the wrong thing over any sort of benefit for workers.

Senator KETTER: Could you elaborate on your comments about the tax advantage, in relation to the amnesty?

Mr Mitchell : Of course. An employer who comes forward during a period of the amnesty, should the amnesty be enacted in its current form, is eligible for a tax deduction on the payments made, including nominal interest, which is a significant advantage. Tax deductible payments offset the rest of your taxable income. It's an advantage not available to other people who have done the wrong thing. I don't think that a person putting their hands in the till would get a tax deduction for handing it back. I think that by giving this to employers what the government has really intended is that it's happy to see—perhaps not happy. The government is, once again, putting the interests of rogue employers above the interests of workers.

Senator KETTER: How would you describe the government's activity on proactively taking action on superannuation guarantee underpayment?

Mr Mitchell : So far it's been wholly inadequate. There are nearly three million people who have their super unpaid, but the ATO isn't properly resourced to go after people who've had their superannuation entitlements stolen from them, and it's something that should occur. There should be more proactive compliance, and the best way to get that is by allowing workers, their unions and their superannuation funds to proactively enforce the superannuation obligations in the same way that people proactively enforce unpaid wages.

Senator KETTER: You've made some comments about how the amnesty has no benefit for workers in insolvent situations. Can you elaborate on that?

Mr Mitchell : If the employer no longer exists, they cannot take part in the amnesty. In the submission, I've given the example of a textiles manufacturer who went insolvent without paying superannuation. Many times these companies go insolvent purposefully, and there's no recourse for these workers. These employers aren't able to approach the tax office to try and pay their superannuation obligations. Similarly, the unions and superannuation funds don't have standing to represent these workers. So there needs to be more done to ensure that there aren't incentives to phoenix companies, and there are better ways to recover unpaid superannuation than those that exist at the moment.

Senator KETTER: Have you had an opportunity to look at the ACCI and COSBOA submissions?

Mr Mitchell : No, I haven't, sorry.

Senator KETTER: You might have been here when I was asking questions about ACCI's view about missed payments arising because of natural disasters and system outages. Do you have a view about whether that's a legitimate excuse for nonpayment of superannuation?

Mr Mitchell : It's pretty extraordinary that one of the major examples that ACCI would use to defend employers ripping off their workers by not paying their superannuation is an earthquake, a tsunami or a tornado. They're quite rare. Obviously anyone caught up in a natural disaster deserves the utmost compassion and the ability to get back on their feet in the time that's required to do so, but it just shows that, rather than addressing the real problem, which is systemic underpayment—that is, some businesses are deliberately dishonest and use superannuation theft and wage theft as a business model—ACCI will go to extreme examples like natural disasters.

CHAIR: Do you have any idea of how many businesses use superannuation and wage theft as a business model?

Mr Mitchell : I don't have a number on that.

CHAIR: So you're just making that up?

Mr Mitchell : No, not at all. You see the constant exploitation of franchise workers in places like Caltex and 7-Eleven. The franchise business model effectively runs on exploitation.

CHAIR: Do you have a sense of the size of the number of businesses that use wage theft and superannuation theft as a business model?

Mr Mitchell : No, because the problem is so—

CHAIR: I think that's quite a large claim to make, Mr Mitchell.

Mr Mitchell : Definitely, but it's quite a large problem that exists. What you have are millions of workers being underpaid superannuation. To say that three million workers is an inadvertent missed payment is not true. You see cafes in Melbourne that pay below the minimum wage and don't pay superannuation. You see 7-Eleven forcing their workers to hand back their wages, and I doubt they're paid their superannuation because the risk of being caught is so low.

Senator KETTER: There are various estimates as to the underpayment—$3 billion, on one hand, up to $5.6 billion, on the other hand. We're not talking about peanuts here.

Mr Mitchell : That's right.

Senator KETTER: And there are a significant number of workers involved in that. In the COSBOA submission, Mr Strong says that there are plenty of valid reasons why an honest businessperson may not have paid their workers' superannuation on time—a sick child or a personal health problem. What does that say to you about how seriously the payment of SG is taken?

Mr Mitchell : It's not taken seriously enough at all. Superannuation is workers' deferred wages. It should be taken seriously as workers' wages and paid at the same time as workers' wages. The fact that they'll go to a highly emotive example like that shows that COSBOA aren't treating superannuation with the respect that it deserves.

Senator KETTER: What did you make of their comment in the submission and repeated here, I think in your presence, this morning that COSBOA may well recommend that their members engage in more contracting of labour and labour hire in response to the escalation in regulation?

Mr Mitchell : It's horrible but not surprising. We see that labour hire and contracting are increasing because workers' rights are being eroded, and the ability for workers to stand up to their bosses when they're doing the wrong thing is declining. That employer organisations would recommend transitioning to more insecure work models as running the business is really detrimental to the society that we think Australia could be and should be.

CHAIR: I do think, for the record, that Mr Strong was suggesting that one of the reasons why he would prefer to use a labour hire firm is that he's nervous about the thought of a proactive enforcement by funds and unions. First of all, how many members does the ACTU have? I know it's 16 different unions, isn't it, but how many union members are there?

Mr Mitchell : There are nearly two million union members.

CHAIR: That's two million of the 10.6 million employees in Australia. Just finally, do you think that recovering $230 million in unpaid super—which is the estimate that has been made that will come specifically from this amnesty—to 50,000 employees is a good thing?

Mr Mitchell : Again, I don't think the amnesty is the way to go about this. I think that that's a drop in the ocean compared to the amount of unpaid superannuation which happens every year.

CHAIR: Do you think that 50,000 employees would like to see that $230 million in their accounts by the end of the year?

Mr Mitchell : I think that the three million would like to see that $5.6 billion in their accounts.

CHAIR: Do you think that the $230 million that goes to those 50,000 employees is important?

Mr Mitchell : I do.

CHAIR: Thank you, Mr Mitchell. Thank you very much for appearing before the committee today.

Mr Mitchell : Thank you for your time.