Methodology

What has changed

We've changed our methodology in 2024 to use a random enquiry program (REP) based bottom-up statistical model to estimate the SG gap. Acknowledging this is the first year of applying a bottom-up approach methodology to inform gap estimate results and may be subject to further enhancements.

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 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 take the estimated unreported contribution amount from Step 1 and uplift it to account for amounts that is not detected.

Step 3: Estimate non-pursuable debt

While the current SG model does not have an estimated 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

Table 3 shows the estimate amounts for the 6 steps of the SG gap from 2016–17 to 2021–22.

Step	Description	2016–17	2017–18	2018–19	2019–20	2020–21	2021–22
1.1	Population	871,272	873,210	857,337	903,261	1,017,939	1,003,474
1.2	Voluntary expected collections ($m)	55,777	58,416	61,420	64,912	66,830	75,103
2.1	Amendments ($m)	735	820	804	653	802	1,012
2.2	Expected collections ($m)	56,512	59,235	62,224	65,565	67,632	76,115
3	Unreported tax($m) (See note)	3,549	3,685	3,881	4,412	4,836	5,157
4	Non-pursuable debt ($m)	n/a	n/a	n/a	n/a	n/a	n/a
5.1	Gross gap ($m)	4,284	4,504	4,685	5,065	5,638	6,170
5.2	Net gap ($m)	3,549	3,685	3,881	4,412	4,836	5,157
6.1	Theoretical liability ($m)	60,061	62,920	66,105	69,977	72,468	81,272
6.2	Gross gap (%)	7.1%	7.2%	7.1%	7.2%	7.8%	7.6%
6.3	Net gap (%)	5.9%	5.9%	5.9%	6.3%	6.7%	6.3%

Note: Non-detection is captured within unreported tax component

Find out more about our overall research methodology, data sources and analysis for creating our tax gap estimates.

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.

Accounting for non-detection in the gap

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 $2,533 million in 2021–22.

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	2016–17 ($m)	2017–18 ($m)	2018–19 ($m)	2019–20 ($m)	2020–21 ($m)	2021–22 ($m)
SG contributions misreported (excluding hidden wages)	234	246	254	283	328	364
Hidden wages	1,705	1,797	1,890	1,953	2,027	2,170
Total non-detection	1,940	1,797	2,144	2,236	2,355	2,533

 

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 ABS.

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 super guarantee net gap estimates, 2009–10 to 2021–22

The data is presented in Table 4 below.

Table 4: Current and previous net super guarantee gap estimates, 2010–11 to 2020–21

Gap	2009–10	2010–11	2011–12	2012–13	2013–14	2014–15	2015–16	2016–17	2017–18	2018–19	2019–20	2020–21	2021–22
2024	n/a	n/a	n/a	n/a	n/a	n/a	n/a%	5.9%	5.9%	5.9%	6.3%	6.7%	6.3%
2024 superseded model	n/a	n/a	n/a	n/a	n/a	n/a	n/a%	4.7%	5.0%	5.3%	5.3%	5.5%	2.5%
2023	n/a	n/a	n/a	n/a	n/a	n/a	5.7%	4.7%	5.0%	5.2%	5.2%	5.1%	n/a
2022	n/a	n/a	n/a	n/a	n/a	6.0%	5.7%	4.7%	5.0%	5.1%	4.9%	n/a	n/a
2021	n/a	n/a	n/a	n/a	5.5%	5.1%	4.7%	3.6%	4.0%	3.8%	n/a	n/a	n/a
2020	n/a	n/a	n/a	5.6%	5.6%	5.2%	4.8%	4.0%	4.0%	n/a	n/a	n/a	n/a
2019	n/a	n/a	6.5%	5.3%	5.3%	5.1%	4.8%	3.9%	n/a	n/a	n/a	n/a	n/a
2018	n/a	5.6%	6.5%	5.3%	5.2%	5.0%	4.8%	n/a	n/a	n/a	n/a	n/a	n/a
2017	3.8%	4.6%	5.9%	4.8%	4.7%	5.2%	n/a	n/a	n/a	n/a	n/a	n/a	n/a