ASFA explained in the submission, that under the FEG, the Commonwealth pays an advance on account of certain unpaid employment entitlements in cases where an individual’s employment ended in circumstances connected with the insolvency or bankruptcy of their employer and the individual cannot obtain payment of their entitlements from other sources.

“The treatment of unpaid superannuation in the case of an employer insolvency or bankruptcy is currently subject to a complex combination of legislative provisions, including the Superannuation Guarantee (Administration) Act 1992, the Corporations Act 2001, the Bankruptcy Act 1966, and the ‘director penalty notice’ provisions of the Taxation Administration Act 1953,” the submission said.

The types of employee entitlements currently covered by the FEG are limited, the submission said, and do not include unpaid superannuation contributions.

“In ASFA’s view, there is merit in reviewing the treatment of unpaid SG entitlements in insolvency or bankruptcy, with the objective of considering how to achieve the maximum possible recovery on behalf of affected employees,” the submission said.

“ASFA estimates it would cost around $150 million per year to include unpaid SG in the FEG, with around 55,000 individuals affected.”

While the Superannuation Guarantee Cross-Agency Working Group argued against the inclusion of SG on the basis that it would have a budget impact and superannuation contributions are not immediately accessible by employees, ASFA argued that neither of these points was compelling.

“The cost is manageable within the overall budget context and other initiatives of the government are likely to decrease the future level of SG non-compliance,” the submission said.

“Superannuation contributions in many instances have led to wages being lower than they would otherwise be and it is unfair to carve out unpaid SG contributions from worker entitlements covered by the FEG.”

ASFA also said in submission that while the age pension assets test changes that took effect from 1 January 2017 have made the age pension fiscally sustainable for Australian governments in the years ahead, the government should not tighten the asset or income tests any further “as it could leave many Australians in retirement worse off”.

ASFA chief executive Dr Martin Fahy said reliance on the age pension would decrease further as superannuation balances increase, reinforced by the tighter assets test for the age pension and due to the continuing trend for people to remain in paid work after age 65.

“Super is working and will do more of the heavy lifting to deliver retirement outcomes into the future,” he said.