Legal Comment by Mark Illidge of Hinterland Lawyers

February 2008

The Australian Taxation Office can currently take up to 12 months to catch out with employers who have failed to make compulsory superannuation payments to employees.

In the event that your employer was to become insolvent and to go into some form of external administration (liquidation, administration or receivership), employees could be considerably out of pocket if their employer had failed to make compulsory super payments prior to becoming insolvent.

Changes to the Corporations Act 2001 mean that, from 31 December 2007, employees of companies that go into liquidation, voluntary administration or receivership stand a better chance of receiving their super entitlements.

Previously any unpaid employer contributions were ranked behind unpaid wages and ranked equally with unsecured creditors. The changes provide that any outstanding employer contributions will now get the same priority as unpaid wages.

It should be noted however that there is no guarantee of payment as the legislation assumes that there is sufficient money left in the company to pay the superannuation. If there's no money left in the company, the employee will miss out.

Whilst the new rules might be good news for employees, they may not be good news for company directors and their relatives. Previously, they could receive a lump sum of unpaid superannuation, up to about $100,000. Under the new rules, any amount exceeding $2,000 that is claimed by directors will rank equally with unsecured creditors.

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