Superannuation ‘Stapled’ Rules To Take Effect

The recent passage through parliament of the Morrison Governments, “Your Future, Your Super” legislation, will undoubtedly make substantial changes to the superannuation landscape as we know it in Australia, with the aim of enabling a more modernised, improved, and effective system. With the superannuation system managing approximately $3 trillion in retirement funds of over 16 million Australians, it is essential that the system operates adequately and efficiently.

The legislative reforms, particularly in relation to “stapled” superannuation requirements which are scheduled to take effect on 1 November 2021, are a positive step forward in ensuring that the superannuation system adapts to better meet the needs of Australians.

We take a look at the new, stappled superannuation rules, and what these changes mean for both employers and employees and the process required.

Background to the changes

The Commonwealth Productivity Commission’s Report of 21 December 2018, into the effectiveness and competitiveness of the superannuation system in Australia, highlighted several critical flaws, where the system was not adequately meeting the needs of Australians. The most prominent of these was the extensive number of unintended multiple superannuation accounts, resulting in excessive fees, that ultimately reduce the retirement savings of hard-working Australians.

Following this report the Morrison Government has implemented the Treasury Laws Amendment (Your Future, Your Super) Bill 2021, which implements a number of the Productivity Commissions recommended changes. One key change of the Amendment Bill is that all new employees, on commencement of a new position, will have their superannuation “stapled”, meaning it will follow employees from job to job, therefore reducing the instances of multiple superannuation accounts.

With “stapling” of superannuation for new employees set to commence on 1 November 2021, it is pertinent that both employer and employees familiarise themselves with the changes, and what needs to be done to ensure compliance.

Stapling, What is it?

The introduction of super stapling means that Australians who commence work in a new position from 1 November 2021 will be attached to one superannuation fund, which will be stapled to them for life, unless they choose otherwise.

In order for a fund to be stapled, it must be deemed to be either a compliant super fund or alternatively a compliant retirement savings account (RSA), and capable of accepting contributions by employers made on behalf of employees, with the employee an active member of the fund or RSA.

Prior to these changes, if an employee commenced a role with a new employer and elected not to nominate a super fund for the employer to make payment of super contributions to, the employer would simply open a new account in the employers default super fund. The changes will mean that this process is forgone, with the employer required to search for the stapled fund, rather than creating a new account with a default fund, having the effect of reducing the number of duplicate and inactive super accounts.

Whilst the new stapling changes affect all new employees, they do not apply to current or existing employees, who have commenced employment prior to 1 November 2021.

Why do we need change and what are the benefits?

Change, in any sense, generally raises questions as to why it was needed in the first place and whether they are in fact necessary. In the case of stapling superannuation, these changes were absolutely essential due to the sheer volume of multiple superannuation accounts in existence. It is estimated that there are currently 6 million multiple superannuation accounts held by 4.4 million Australians, with an estimated 27% of Australians having more than one super account, and with Australians paying over $30 billion last year alone in fees to super funds. The effect of having multiple accounts doing nothing but eroding away the retirement savings of Australians. Clearly a change was needed.

The benefits of the changes to employees are very clear, less wastage in terms of fees, and less instances of having multiple accounts, that require time and energy to track down and consolidate. Over the next 10 years it is anticipated that the stapling changes will boost super fund balances by $2.8 billion.

The changes, also benefit employers, particularly smaller organisations who, after making necessary changes to their onboarding processes to identify new employees, will be free of the administrative nightmare that can often be chasing down employees for superannuation details upon commencement of employment. The changes will make it easy for employers to identify the stapled fund, by conducting a simple search, and will aid in the compliance process.

For larger businesses, particularly those who are invested heavily in the benefits associated with their default super funds as part of their employment packages, stapling will certainly reshape the superannuation landscape. These larger entities, in addition to implementing sound processes for onboarding new employees and identifying stapled funds, will also need to actively promote their default funds to prospective employees should they want to promote such benefits. A significant change from an administrative perspective, but nothing that investing in a new onboarding process won't fix.

What you need to do?

With the 1 November 2021 commencement date just around the corner, it is important that your business is organised and understands what is required when a new employee commences with your business. From 1 November 2021 an employer will need to;

  • Include a form seeking superfund details for new employees as part of your onboarding process if you have not implemented this already; and

  • Should your employee not provide a selected fund, make contact with the ATO to confirm an employees stapled fund and ensure payments are directed to this fund.

Contacting the ATO to confirm a new employees super fund, will become an automated process in 2022, as part of a payroll system integration, which will make this process even easier for employers.

As with any change, there will be a period of adjustment. However, the Morrison Government’s ‘stapled’ superannuation changes are set to have a positive impact on the retirement savings of many Australians, ensuring that each Australian is not wasting funds on unnecessary fees by having multiple accounts. This modernised and improved approach to superannuation, can only mean positive changes for Australians.

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