Superannuation in the New Financial Year
What to expect
With the commencement of the new financial year, several changes to superannuation are now effective or scheduled to take effect throughout 2021-22.
Some of the changes employers should be aware of include:
- The legislated increase of 0.5% to the super guarantee;
- The automatic retention of an employee’s superannuation fund when changing employers; and
- The annual assessment of superannuation funds and their performance.
Super Guarantee to increase to 10 per cent
Arguably, the most significant change has been the increase to the super guarantee (SG).
SG is the minimum percentage of an employee’s wage that employers are required to contribute to their employee’s superannuation fund. Since 2014, SG has been frozen at 9.5%.
As of 1 July 2021, SG increased from 9.5% to 10% marking the first increase to employer superannuation contributions in the last 7 years. Currently, SG is legislated to progressively increase each financial year until reaching 12% in 2025.
With the increase effective from 1 July 2021, employers should review their payroll and accounting systems and ensure such systems are updated to incorporate the increase to the legislated SG rate.
Retention of Employee Superannuation Fund
In the 2020-21 Federal Budget, the government released their Super Reforms – Your Future, Your Super package. A new measure under the package established that employees would have their superannuation fund “stapled” to them when changing employers. The purpose of this measure is the reduction of fees encountered by employees due to maintaining various superannuation accounts. It is estimated that this measure will result in an increase of $280 million annually in Australia’s super balances.
Initially, the measure was forecasted to commence from 1 July 2021; however, the commencement date has since been amended to 1 November 2021.
Under the new initiative, where employees do not nominate a super fund, employers will be required to check with the ATO to determine if their employee has a ‘stapled super fund’ that contributions must be made to.
Superannuation funds to account for underperformance
Another initiative commencing from 1 July 2021 under the Your Future, Your Super package requires superannuation funds to undergo an underperformance assessment conducted by the Australian Prudential Regulation Authority (APRA) where results will be published on the ATO website.
The assessment will be the primary method for measuring underperformance in the superannuation sector and where a fund is found to be underperforming, it will be required to notify its members by 1 October 2021.
Superannuation funds will be highlighted as underperforming by the ATO YourSuper comparison tool until their performance improves. Where a fund fails two consecutive assessments, it will not be permitted to accept new members until its performance increases.
It is quite common for employers to recommend superannuation funds to their employees whether informally or through mechanisms such as enterprise agreements. It is therefore recommended that employers stay up to date on the performance of their suggested superannuation funds in ensuring the best product for their employees.