Generally, if you as an employer, pay and employee $450 or more before tax in a calendar month, you will have to pay superannuation on top of wages. The minimum amount paid is called the super guarantee (SG):
The SG is currently 10% of an employee’s ordinary time earnings.
The employer must pay the SG at least four times a year, by the quarterly due dates.
Super payments must go to a complying super fund – employees can choose their own fund.
From 1 November 2021, employers will require employees to nominate their superannuation fund /account before commencing work. Employers will then be required to make super guarantee (SG) contributions to that account. The only exception is if an employee has asked explicitly that their super be paid into a different account of their choice.
As part of the ‘Your Future, Your Super’ reforms, all existing super funds will be linked, or “stapled”, to an individual’s myGov record. Super stapling will ensure that an individual’s superannuation fund remains throughout their career regardless of changing jobs.
Recent superannuation stapling changes may require employers to adjust the onboarding and ongoing payroll process to meet these requirements. But why the change?
The previous superannuation system tended to create additional superannuation funds for the same person. Having multiple funds can cause a significant impact on retirement balances and other fund related costs, i.e. duplicate issuance policies and account fees. With this change, the Australian Department of Treasury and Finance estimates that Australians will save about $2.8 billion over the next ten years by reducing the number of duplicate superannuation accounts.
What happens if an employee does not nominate their fund? Previously employers could pay into their default or preferred superannuation fund if an employee failed to provide their fund preference.
From 1 November, if a new employee does not nominate a super fund, the employer must check for an existing stapled fund using the ATO online services. If the employee has a stapled fund, employers must use this fund for all SG payment contributions. If an employee chooses to pay their super into a different fund, the employer must pay SG contributions to that nominated account.
Suppose the employee does not have an existing stapled fund? In that case, it is advisable to consult and advise your new employee that all SG contributions will be paid to the employer’s approved default super fund.
But what about existing employees? The super stapling changes do not apply to existing employees, and employers must continue to pay SG contributions into their current fund.
If an employer fails to meet super stapling obligations, they are at risk of penalties and fines from the Australian Tax Office. However, there has been a grace period for the first 12 months to allow employers to adapt their business practices to align with the new requirements.