Industry super funds are failing small businesses

The Council of Small Business of Australia has been concerned for some time about the behaviour of the industry superannuation funds.

They have been a law unto themselves for too long and need to be brought into line and behave like ethical, efficient corporations.

Their behaviour and practices would not be acceptable to banks and other financial institutions and certainly not for government agencies.

The problem is that we, as employers, are forced to do their work for no financial return and we will get fined by the government if we do not do their work, no matter how difficult the funds make compliance.

The industry superannuation funds are in most cases the default fund that is in an industrial award and so the employer has no choice but to use that fund, no matter how difficult or inefficient they are, and they are very inefficient in their processes and their communications.

In normal business practices if a supplier created too much work or was inefficient we, as a business, could just change suppliers. We cannot do that with superannuation. The fund we have to use is chosen for us by an industrial award or by the employee. We have to use organisations that in most cases are inefficient, poor communicators and run by a board that represents unions and big business organisations who do not understand, nor often care about, small business people.

Examples

The rules for lodgement of superannuation are that a small business employer should lodge their employees’ funds at least quarterly and provide enough information so that the fund manager can identify who owns the money.

But the industry super fund managers, which are the biggest funds, make up their own rules and ignore the government rules.

The funds often provide employers with false and misleading information and then threaten small businesses with legal action even if they have not done anything wrong.

One fund states that employers are required to pay contributions by the 14^th day of each month, another fund is even more demanding and threatening, to quote, “If you do not pay your contributions to REST within 7 days of receipt of this letter, or advise us that no contributions need to be paid, REST will instruct its credit manager to commence legal action to recover the outstanding contributions.”

REST, an industry fund, does not know if money is owed, but is willing to make threats anyway. The fund isn’t even aware whether the employer is still operating or the employee has left, but is willing to waste time and money chasing what is probably a phantom debt. That employer cannot refuse to use REST even though REST is obviously challenged in efficiency, challenged in ethics and challenged in understanding how business works.

These funds also demand that employers fill out complicated forms, either paper-based forms or online forms. These forms are sometimes two or three pages and ask for information that we do not have to provide. They are convoluted, confusing and designed by people who have never had to fill one out.

One fund offers a free clearing house to send money to other funds. This appears to be generous, but the problem is of course that they then make up their own compliance rules. For example, in one case to be eligible to use this so-called free service you have to have AustralianSuper as your default fund and have more than half your workforce with AustralianSuper.

Given that over 60% of workplaces in Australia have fewer than five employees it seems that a business would have to have three employees out of four in AustralianSuper to use the clearing house, and what if one leaves? Another fund allows access to their clearing house if you have at least 15 employees in their fund.

No idea these super funds, no idea.

Another fund has a ‘form letter’ prepared in advance for a mistake they know they will make. This form letter is jargon-filled, convoluted gobbledygook. The second line of the letter even admits to a mistake and offers the right information. Why didn’t they get the information right in the first place, and why can’t they communicate clearly and professionally?

This arrogance has to be curbed. It is costing people time and money. It is forcing employers to take their mind off their business to look after someone else’s business. It puts the job of the fund member (our employee) at risk and it detracts from a focus on safety in the workplace. Every minute of time wasted by a small businessperson doing unrewarding work is time better spent on making the business work and on safety.

Our preference is to take small business owners out of the collection system and put super into PAYG and let the person who owns the money work things out with the Tax Office – and the Tax Office is much more efficient and engaging than the fund managers.

The other option is for the funds to actively promote the government’s superannuation clearing house. This is a much better option for employers; the funds promised to promote it and so far their promotion has been half-hearted at best.

Peter Strong is the executive director of the Council of Small Business of Australia.