The Government has proposed changes to superannuation under its Treasury Laws Amendment (Your Future, Your Super) Bill ("the Bill"), which will, among other changes, provide for scheduled increases in compulsory employer superannuation contributions from 9.5% to 10% from 1 July 2021.
Employers should be aware of the changes to the superannuation rate as well as their new obligations to ensure that employees are being paid super into their existing accounts.
Changes under the Bill
The Bill seeks to amend the Superannuation Guarantee (Administration) Act 1992 and the Superannuation Industry (Supervision) Act 1993 to schedule increases to the superannuation guarantee and introduce new obligations on employers to ensure that employees are being paid super into their existing funds, known as "stapling".
Over the next five years, the Bill sets out scheduled increases to the superannuation guarantee up to 12% in 2026. The first increase will take effect from 1 July 2021, increasing the superannuation guarantee contribution from 9.5% to 10%.
The other major change is the introduction of "stapling" which is a process designed to prevent the creation of duplicate super accounts when an individual changes job. Under these changes, unless the employee takes action to change their super account, the employer must send contributions to the fund the employee had at their previous workplace. It is the employer's responsibility to check with the Australian Taxation Office ("ATO") whether the new employee has an existing super fund. If the new employee does not have a super fund, the employer must create one with their default fund but only after ATO confirmation that there is no "stapled" fund for that employee.
Other proposed changes include preventing unnecessary fees, increasing accountability for poor performance on funds for account holders and improving the transparency of funds.
While the Australian Council of Trade Unions ("ACTU") has welcomed the rise in super contributions, it takes issue with the accompanying legislation that provides for the "stapling" of workers to potentially "dud funds" as a result of "dodgy benchmarking" which could leave employees "thousands of dollars worse off in retirement". Employer "default funds", the ACTU argues, often favor the superannuation funds of big banks over Industry Super Funds, cited as a fundamental reason behind unions against superannuation changes. Essentially, the ACTU has called on the Morrison Government to keep its election promise of the superannuation guarantee increase to 12% and drop the accompanying amendments in the Bill entirely.
The current climate
Following the end of JobKeeper in March and the continuing challenges for employers in the ongoing pandemic recovery, any changes to superannuation contributions this year and in the coming years will be a key focus for employers. Changes to superannuation contributions are likely to be the next big development to the employer/ employee relationship over 2021.