What has changed
We are now in the second year of applying a bottom-up approach methodology to inform superannuation guarantee (SG) gap estimate results.
Step 1: Estimate unreported SG contributions
Unreported SG contributions consist of the additional contributions expected to be raised if we undertook compliance activity on the portion of the SG population not covered. It arises from incorrectly reported tax returns as unreported SG liabilities from the active employing entities population.
We use the random enquiry program (REP) compliance outcomes to determine the average amendment amount and average rate of amendments. These results are then extrapolated to the entire active employing entities population to calculate the estimated unreported contributions amount.
Step 2: Estimate non-detection
We account for non-detection by applying an uplift factor to amendments and hidden wages. The impact of non-detection on the SG gap is estimated to be $2,884 million in 2022–23.
Not all errors are detected through the REP. We account for these by applying a non-detection uplift to the unreported tax liability estimate.
The 2 sources of non-detection for this tax gap relate to:
- SG contributions misreported
- hidden wages.
The unreported tax liability is divided into the above elements, with an appropriate non-detection factor then applied to each portion.
Source of non-detection | 2017–18 ($m) | 2018–19 ($m) | 2019–20 ($m) | 2020–21 ($m) | 2021–22 ($m) | 2022–23 ($m) |
|---|---|---|---|---|---|---|
SG contributions misreported (excluding hidden wages) | 246 | 254 | 282 | 328 | 363 | 474 |
Hidden wages | 1,796 | 1,891 | 1,964 | 2,047 | 2,196 | 2,410 |
Total non-detection | 2,041 | 2,144 | 2,247 | 2,375 | 2,559 | 2,884 |
Step 3: Estimate non-pursuable debt
While the current SG model does not have an estimated non-pursuable debt (NPD) component, going forward with SG assurance intel we will be in a better position to estimate NPD applicable to the SG population.
Step 4: Calculate the gross gap and net gap
We combine the amounts determined above for amendments, unreported tax, and non-detection with non-pursuable debt to obtain the gross and net tax gaps. The net gap is equal to the gross gap less amendments.
We then add the gross gap to the voluntary SG contributions amount to estimate the theoretical SG liability. We calculate the gap percentages by dividing the gap estimate by the theoretical SG liability.
Summary of the estimation process
Step | Description | 2017–18 | 2018–19 | 2019–20 | 2020–21 | 2021–22 | 2022–23 |
|---|---|---|---|---|---|---|---|
1 | Estimate unreported amounts and extrapolate to population ($m) | 2,457 | 2,536 | 2,824 | 3,277 | 3,360 | 4,737 |
2 | Apply estimate for non-detection ($m) | 2,041 | 2,144 | 2,247 | 2,375 | 2,559 | 2,884 |
3 | Estimate for non-pursuable debt ($m) | n/a | n/a | n/a | n/a | n/a | n/a |
4.1 | Gross gap ($m) | 4,499 | 4,681 | 5,071 | 5,651 | 6,189 | 7,620 |
4.2 | Subtract compliance outcomes ($m) | 812 | 796 | 623 | 616 | 859 | 1,376 |
4.3 | Net gap ($m) | 3,687 | 3,885 | 4,447 | 5,035 | 5,330 | 6,245 |
4.4 | Add expected collections ($m) | 58,416 | 61,420 | 64,912 | 66,830 | 75,103 | 97,225 |
4.5 | Theoretical liability ($m) | 62,915 | 66,101 | 69,983 | 72,481 | 81,292 | 104,845 |
4.6 | Gross gap (%) | 7.2% | 7.1% | 7.2% | 7.8% | 7.6% | 7.3% |
4.7 | Net gap (%) | 5.9% | 5.9% | 6.4% | 6.9% | 6.6% | 6.0% |
Note: Non-detection is captured within unreported tax component
Find out more about our overall research methodology, data sources and analysis at Principles and approaches to measuring gaps.
Limitations
There are limitations associated with estimating the SG gap.
The current methodology provides an aggregated estimate of the SG gap.
The assumptions we use to construct our estimate are informed by actual data and expert opinion. The following caveats and limitations apply when interpreting this tax gap estimate:
- The precision of the estimate is limited by the sample size.
- The true extent of non-detection is unknown and is challenging to measure. We assume there will be errors and omissions in our compliance activities due to factors outside our control and limitations in operational capability and capacity.
- The true extent and distribution of hidden wages is challenging to measure. We assume be shadow economy behaviour in this population.
Updates and revisions to previous estimates
Each year we refresh our estimates in line with our annual report. Changes from previously published estimates occur for a variety of reasons, including incorporating updated estimates of wages published by the Australian Bureau of Statistics.
We also make changes for reasons such as:
- improvements in methodology
- revisions to data
- additional information becoming available.
Figure 2 displays the gross gap and net gap from our current methodology compared to the estimates released in previous years.
Figure 2: Current and previous superannuation guarantee gap estimates, 2009–10 to 2022–23
The data is presented in Table 4.
Gap year | 2017–18 | 2018–19 | 2019–20 | 2020–21 | 2021–22 | 2022–23 |
|---|---|---|---|---|---|---|
2025 | 5.9% | 5.9% | 6.4% | 6.9% | 6.6% | 6.0% |
2024 | 5.9% | 5.9% | 6.3% | 6.7% | 6.3% | n/a |
2023 | 5.0% | 5.2% | 5.2% | 5.1% | n/a | n/a |
2022 | 5.0% | 5.1% | 4.9% | n/a | n/a | n/a |
2021 | 4.0% | 3.8% | n/a | n/a | n/a | n/a |
2020 | 4.0% | n/a | n/a | n/a | n/a | n/a |