It might not seem like much, but half a percentage point can make a world of difference. In the cash rate, in your cholesterol levels. And now, in your Super.
Some have called it one of the biggest superannuation reforms since super was first introduced in 1992, when the Senate passed changes to superannuation which will have a profound impact for employers across the board.
On 1 July, 2021 the Federal Government has maintained the legislated increase to the superannuation guarantee, which will increase by 0.5% to 10%.
They have also increased the annual concessional contribution cap (pre-tax salary sacrificed contributions to super) from $25,000 to $27,500. The annual non-concessional cap is increasing from $100,000 to $110,000 (the after-tax savings added to super).
With around a quarter of medium-sized businesses planning to increase employee numbers over the next month (and likely looking ahead), a wide-reaching understanding of the implications of ‘Your Future, Your Super’ changes and likewise how to mitigate any challenges, will be important for employers at these businesses to ensure a smooth onboarding process.
Valantis Vais is the Head of Go-to-Market for MYOB Enterprise and we spoke to him about what’s changing and why. He says:
- Stapling – With a goal of reducing the number of Australians with duplicate super accounts, from Monday 1st November employers of new employees who don’t nominate a specific super fund to receive their contributions, will have to make contributions to their existing fund if they have one. The result of this means that unless an employee specifically chooses to join another fund at the point of onboarding, they will be ‘stapled’ to the first super fund they join.
- Choosing a fund – As of Thursday 1st July, employees are able to use a new interactive online tool called ‘YourSuper’, to compare super funds as well as show their current super accounts. On the tool, users will see funds ranked by investment returns and fees, with results of annual performance tests also feeding into the tool.
- Underperforming funds – Delivered by APRA, new annual performance tests have been introduced to measure super funds against benchmarks for financial returns to their members. Those that don’t meet the required benchmarks will be required to inform their fund members, and if they fail for two years consecutively, they will be stopped from acquiring new members. Current fund members will find out in early October if their fund is up to standard.
Understanding your obligations
In terms of what’s required by employers, the changes mean that when employers are onboarding a new employee, if they have failed to choose a fund, the employer will be in breach of their choice-of-fund obligations if they place that employee with a default fund without checking with them first about an existing super account.
To mitigate this, employers must either:
- Ensure a super selection process is in place so that all employees make a choice of fund when onboarded; or
- Engage in a manual look-up process with the ATO for every employee who has not made a choice.
As well as doing what’s required for an organisation, all employers have a responsibility to do the right thing by their employees. This includes helping to look after employee financial wellbeing and making sure that each employee is being actively engaged when it comes to their financial future.
In relation to super fund choices and the recent changes, there are a number of actions employers can take that put the interests of their people front and centre. And some of these will also be a greater benefit to their business.
Offer new employees choice at onboarding – regardless of whether they have an existing super fund, employees should be offered the chance to review a number of super fund selection options to choose from for their financial benefit. This removes the likelihood that a new employee won’t make a super fund choice and there are now a range of digital workforce management products out there that seamlessly capture employee information and integrate super choices and selection into the onboarding process – like Flare (which is set up to meet these changes already) or MYOB’s new workforce management attachment that connects with Advanced People.
Ensure the funds the business offers are performance reviewed – employers should consider checking in with the providers of the funds they currently offer, to confirm if they’re set to be reviewed in early October and any concerns or expectations they have around this period. There’s also an opportunity to use this conversation as a chance to ask about how they plan to communicate the outcomes of this review with their customers and likewise any benchmarking to bear in mind. It’s worth also considering the timing of this discussion, given that the news of the changes to super funds relatively fresh and some providers may still be working through their plans.
Check systems for super choice are automated and meet compliance requirements – the right technology equips employers with what they need to offer choice, as well as helps to minimise compliance issues. A system that is automated and compliant with new legislation means that a business isn’t exposed and its people won’t be concerned about being exposed either. Using a digital solution that integrates with other key business management systems like your payroll software, also helps shore up the right flow of information, which mitigates the chance of compliance exposure.