Introduced as part of the recent Your Future, Your Super Federal Government measures, superannuation stapling applies from 1 November 2021. Under the new measures, working Australians that begin a new job will belong to one superannuation fund for life unless they choose otherwise.
WHY HAVE THE CHANGES HAPPENED?
The measures aim to reduce the number of superannuation accounts people may acquire throughout their working life, minimising the likelihood of additional fees for holding multiple accounts, lost superannuation, and lower interest due to unconsolidated funds, all of which erode the superannuation balance.
WHAT DO THE CHANGES MEAN?
On November 1st, 2021, Superannuation Stapling rules came into effect for all new hires which will determine the superannuation fund into which employers’ Super Guarantee Charge (SGC) contributions are made. The Australian ATO will be writing to all employers advising of this change and employers will be required to play a key role in the implementation of the measures. This is explained below.
MAKING SUPERANNUATION CONTRIBUTIONS FOR NEW EMPLOYEES:
Employers need to provide their new employees with the superannuation standard choice form.
New employees can elect to join their employer’s default superannuation fund or elect to have the company contribute to an existing fund they hold. Employers will be required to provide this form to employees, but completion is optional for employees.
If the employee nominates a superannuation fund of choice then the employer must acknowledge this and provide the relevant details to Payroll and make contributions to the chosen fund. In this case, no further action is required.
If the employee does not nominate a fund of choice and does not elect to join the default plan, then as an employer you will need to move to Step 2.
To try and limit the situation where employees hold various superannuation funds, as an employer, you will be obliged to identify your employee’s stapled fund and make contributions to this fund.
The ATO is responsible for identifying an employee’s stapled super account and provide employers with the required account information to contribute to that fund. A stapled fund is usually the superannuation fund that received the employee’s most recent contribution. The legislation provides specific requirements around what constitutes a stapled superannuation fund. Other rules determine stapling classification in the event a member has multiple accounts and where the most recent contribution is not easily classified. These rules set out by the ATO consider factors such as account balance and attributes about the ‘active’ status of the account (known as ‘tie breaker’ rules).
To search for an employee’s ‘stapled’ super fund, or determine if they have one:
- Log into the ATO Services website and search for the employee using their payroll information.
- The ATO portal will provide details of the employee’s stapled fund (if they have one)
- Make future contributions to:
- the employee’s ‘stapled’ fund provided by the ATO, or
- the employer’s default fund if you hold one where the employee doesn’t have a ‘stapled’ fund and they haven’t chosen a super fund.
Following completion of the Step(s) above, employers can contribute through their normal contribution method (e.g., clearing house, etc.).
CAN A NEW EMPLOYEE JOIN THEIR EMPLOYER’S DEFAULT FUND?
Yes. Employees who wish to join their employer’s default fund can join even if they have a stapled fund. Employees can join their employer’s default fund by completing the Superannuation standard choice form and selecting ‘Join my employer’s default fund’, or electronically through the employer’s onboarding system (if available).
In essence, the default superannuation fund is no longer the fallback position if a new employee does not nominate a fund of choice.
WHAT ABOUT EXISTING EMPLOYEES WHO WANT TO CHANGE SUPERANNUATION FUNDS?
If an employee wishes to change superannuation fund, they are required to complete the superannuation standard choice form. If an employer is concerned about the employee having multiple funds, they should suggest the employee seeks advice from a Financial Adviser, as there can be negative impacts such as multiple fees being charged by not having superannuation funds consolidated.
Find out about changes to Personal Income Protection Policies in 2021