A number of submissions to the Senate inquiry into superannuation guarantee non-payment have questioned whether the Australian Taxation Office is doing enough to detect unpaid super, and suggest the agency should do random audits of employers to identify when they are exploiting casual and part-time employees.

Research from Industry Super and Cbus released in December found employers failing to make the 9.5 per cent compulsory superannuation guarantee (SG) payment were pocketing $3.6 billion per year from 2.4 million workers.

The ISA has since revised its research. It says based on ATO tax file data for 2013-14, 2.76 million people were affected in that financial year by an average of $2025 per person, or an aggregate amount of $5.6 billion.

"This is unacceptable in a compulsory superannuation system," the ISA submission says.

In order to detect unpaid super, the ATO mainly relies on workers dobbing in their bosses (in 70 per cent of cases according to the ATO's own submission to the inquiry).

This, numerous submissions to the inquiry point out, means the ATO is likely underestimating the amount of unpaid superannuation.

The ISA says without random audits there is no reliable way of objectively measuring non-compliance.

It says when the ATO issues a director penalty notice "this should also automatically trigger the risk of being subject to further randomised audits for a period of three years". In 2013-14, the ATO issued director penalty notices to about 1400 companies.

The ATO's submission itself notes that proactive audits "have consistently produced stronger results in terms of adjustments raised per audit".

ATO initiated cases identify non-payment of SG in 82 per cent of cases, the ATO said.

And it added that they also resulted in higher adjustments. In cases where super was underpaid, there was an average adjustment $68,000 per employer compared with the $25,000 resulting from employer notification cases.

ATO over-reliant on employees to report breaches

United Voice said in its submission that "the ATO is overly reliant on employees to report superannuation breaches and its efforts are skewed towards investigating individual complaints, rather than on proactive audits of industries or employers identified as being most at-risk".

Former ATO senior officer Martin Lock also suggests that "strategically targeted random audits" would better help detect the true extent of unpaid super.

"Knowing the amount of SG paid is no substitute for not knowing or estimating the amount underpaid or evaded," Mr Lock said.

"Not being reported by an employee is not sufficient evidence that the employer is fully compliant. For example, while the employer may be compliant for its permanent employees it may not be for its casual or temporary employees, none of whom may have yet become aware of any SG underpayment or have filed reports."

Mr Lock said unpaid super ran "hand in hand with a thriving cash economy and with endemic underpayment of wages".

Other submissions to the inquiry previously have noted that because the SG isn't paid if an employee earns less than $450 a month, many employers are exploiting casual workforces made up mainly of women and students.

Mr Lock said the cash economy in Australia was "rife and flourishing". "Arguably, it has flourished following the ATO's abandonment years ago of strategically targeted random audits," he said.

Mr Lock's submission also suggests that Tax Commissioner Chris Jordan has powers to force superannuation funds to hand over detailed information that would identify unpaid superannuation, but fails to do so.

He also took issue with the low number of ATO compliance staff (170) dedicated to audits of unpaid super, which Mr Lock points out represents less than 0.85 per cent of the ATO's total staff of 20,600.

In testimony to the Senate inquiry earlier this month, Inspector-General of Taxation Ali Noroozi reiterated his previous calls for the ATO to conduct more random audits in order measure the "tax gap" - which includes giving estimates of taxes not paid due to unpaid super - but noted it may be politically unpopular.

An ATO spokesman told Fairfax Media each year the ATO receives about 20,000 reports where people believe that they have not had their superannuation paid by their employer.

"We examine every report and where suitable we follow up by making contact with the employer to seek confirmation, and if necessary we conduct audits and apply penalties," he said.

He said last financial year the ATO raised $670 million in SG (including penalties) from a range of ATO compliance review and audit activities.

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