Your Future, Your Super and Stapled Super Reforms
By Paolo, 29.11.2021
The Treasury Law Amendment Your Future, Your Super Bill 2021 received Royal assent on the 22nd June 2021 and commenced on 1st July 2021 with the exception of Schedule 1 (the ‘Stapled Superfund’ measure) which started on 1st November 2021.
The ‘Your Future, Your Super’ reforms are the next step in the Australian Government’s plan to ensure all Australians can make the most of their Super investments and secure their retirement savings. These reforms also require the Superannuation industry to improve its efficiency, transparency and impart higher accountability on Superfunds and their performance.
This new legislation amendment includes three key aspects:
- A new Superannuation Comparison tool for individuals.
This tool allows individuals to compare key data on various Superfunds and helps them make an informed decision on what Superfund they should choose.
- The Introduction of a Super Performance Test
The test will hold Superfunds accountable for underperformance, encourage lower fees and protect members from poor financial outcomes.
- A Superfund ‘stapled’ to the Employee
To help streamline the payment of Super when an Employee does not make a choice within the required timeframe.
Although this blog article will briefly cover the first two key points, it will predominantly focus on the third and final point: the Introduction of Stapled Super and how this affects both Employers and Employees.
Superfund Comparison Tool
The new YourSuper comparison tool is an interactive assessment tool designed to help individuals review and compare MySuper products based on their cost and performance, to help them choose a fund that can better suit their needs.
The tool displays a list of different funds’ information including:
- Investment Performance Status (Performing | Underperforming | Not Assessed);
- Annual Fees;
- 7-year net return percentage.
Users can then select up to 4 Superfunds at the time and view them as a comparison table with additional information displayed.
The Super Comparison tool is available on the ATO Website.
Super Performance Test
The Australian Government will subject all Superfunds to an annual performance test to ensure all Superannuation Funds are accountable for underperformance. The test is conducted by the Australian Prudential Regulatory Authority (APRA) and is publically available on the ATO website and the APRA website.
From this year, individuals can check if their Superannuation Funds are performing or not from an independent source rather than relying solely on the information provided by their Fund. This will give Australians the ability to timely move their investments into a different and better-performing Fund.
Superfunds that fail the performance test, must notify their members. If they fail for two consecutive years, they won’t be able to accept new members.
The first test was completed in August 2021 and the results are available on the APRA website.
A Stapled Fund is an existing Superfund that is now linked (or ‘stapled’) to an Employee. This Superfund will follow them from job to job and Employers will be required to make Super Contributions to this fund if the Employee fails to make a Superfund choice.
The purpose of this initiative is to reduce the number of Superfunds being opened every time an Employee starts a new job and consequently reduce the cost in Annual Fees payable to each fund.
To be a Stapled Superfund, the fund must meet a number of requirements. These include the Employee being a current member of the fund and the fund being one of these types:
- a complying Superannuation Fund;
- a Retirement savings account;
- a complying Superannuation Scheme.
The ATO decides what the Employee’s Stapled Fund will be, the individual has no control over this decision. If the Employee is a member of only one compliant Superfund, then the ATO will staple this fund to their account. Alternatively, if the Employee has multiple Superfunds, the ATO will apply ‘tiebreaker’ rules to choose which Super to link to the Employee. These rules include:
- whether the ATO has previously identified an account as a Stapled Superfund;
- the recent contributions made into each fund;
- the superfund account balances;
- how recently the Superfunds’ accounts were created.
Stapled Super – Impact on Employees
As well as being empowered with more transparency and information at their disposal, Australian Employees will benefit from having to deal with fewer Superannuation accounts being opened on their behalf by Employers. As their Stapled Superfund will follow them from job to job indefinitely.
Stapled Funds requirements apply to both Employees and Subcontractors deemed as Employees by the Super Guarantee Ruling.
Stapling fund rules only apply to the Statutory Rate of Superannuation Guarantee. They do not apply to any additional Employers’ or Employees’ voluntary contributions.
It is important to highlight that the core Superannuation rules including the choice of Super, the ability to contribute in addition to the Statutory rate and the right to receive quarterly payments have not been altered by the introduction of the ‘Your Super, Your Future’ reforms.
Employees will still have the ability to choose their Superfund upon commencement of employment, by completing a Superannuation Choice Form and returning it to their new Employer within 28 days of their start date.
Employees can still choose between one of their existing funds or their new Employer’s default fund. They can also request their Employer to change their Superfund even when the Employer has started paying super contributions to their stapled fund. However, they have no direct choice in determining what their Stapled Fund is going to be. This is controlled by the ATO.
These new regulations further stress the importance of Employees actively choosing a Superfund that is best suited to their needs and circumstances. Making informed choices about their Superfund will help them avoid being paid into a fund that may not lead them to the best retirement outcome.
Stapled Super – Impact on Employers
The main impact on Employers is on their onboarding process applicable to new Employees. Stapling Superannuation adds an extra administration step to this workflow.
Stapling Super regulations apply to all new Employment Agreements that have started on or after the 1st November 2021.
Employers will still be required to:
- Have a Default or Nominated Employer Superfund as stipulated by their Industry Award;
- Provide a Superannuation Choice Form to their new Employee upon start of Employment;
- Retain the Superannuation Choice Form for a period of 5 years from the termination date of the Employee;
- Pay Superannuation to their Employees on time.
Stapled Super simply introduces an intervening step that must be carried out in between the time an Employee fails to make a choice of Superannuation and the time the Employer is required to open a new Super Account through their Default or Nominated Fund.
To be able to complete this additional step Employers will now have to either secure access to Online Services for Business or rely on the support of their Registered Agent.
Employers who already have access to Online Services for Business and have multiple users accessing their portal will have to carefully manage an additional user access option called the ‘Employee Commencement Form’. This is the option that allows a user to access the new Employees’ Stapled Super account information.
Stapled Super – Process Involved
- When a new Employment Agreement starts, the Employer is still required to provide the Employee with a Superannuation Choice Form.
- If the Employee returns the Superannuation Choice Form, the Super is paid into the chosen Superannuation Fund.
- If the Employee does not return the Superannuation Choice Form within 28 days, then the Employer must make a Stapled Superannuation Request to the ATO via Online Services for Business (or through their Registered Agent).
- If the ATO can match the Employee with a Stapled Fund, then the Employer must pay Superannuation into the Employee’s Stapled Fund, as provided by the ATO.
- If the ATO cannot match the Employee with a Stapled Fund, then the Employer can open a new Superfund account using their Default or Nominated Employer Fund.
We have created a comprehensive User Guide to help Employers make a Stapled Superfund request to the ATO via Online Services for Business. The User Guide is available to our Clients on our Knowledge Base website.
Stapled Super – Moving Forward
Reviewing Onboarding Process and Employment Agreements
Employers should first and foremost review their onboarding process for new Employees including:
- Adding the additional Super Stapling step to their onboarding process;
- Ensuring the person responsible to complete a new Employee workflow has the required access to Online Services for Agents;
- Reviewing and updating their Superannuation section in their Employment Agreement.
Although the ATO has decided on a ‘soft implementation approach’ by providing a transitional arrangement up to October 2022, Employers should make sure this additional step is incorporated into their onboarding processes sooner rather than later.
Penalties for not complying with the Super Stapling reforms are included in the breach of ‘Choice of Liability’. This is usually charged at an extra 25% of the Employee’s Quarterly Super payment capped at $500 per quarter and reportable in the Superannuation Charge Statement.
Informing new Employees about these changes
Although the option to choose a Superfund can be more advantageous for both Employer and Employees, Employer should be careful with the type of information they provide to their Employees about making choices for their Superannuation.
When discussing Super options they should restrict to providing factual information only, and not providing advice.
Employers can inform Employees:
- why they need to choose a Superfund;
- explain the general process of choosing a Superfund;
- explain their obligations to pay Super Guarantee and provide a default Superfund;
- provide their Employees with links to tools such as Super Comparison Tool or the Super Consolidation tools;
- encourage their Employees to choose their Default Superfund in exchange for additional benefits (i.e. higher SGC percentage, Life Insurance etc).
However, Employers cannot give recommendations or express opinions intended to influence their Employee’s decision in making a Super Choice, including:
- which Superfund an Employee should choose;
- the Employee level of super contribution;
- whether or not they should consolidate their Superfunds.
This blog and attached resources are of general nature designed for informational and educational purposes only. They should not be construed as professional financial advice for your individual business. Should you need such advice, consult a licensed financial or tax advisor.