Employers should be aware of Superannuation changes to commence from 1 July 2021.
These were announced in the 2020-2021 budget*, and there are four main changes that will take place (subject to confirmation in May 2021), which employers need to ensure are in place for compliance purposes.
Now is the time for employers to put into place the mechanisms and processes because July will come around before you can say Superannuation Guarantee!
Employees should also be aware of these changes coming into effect, as their employer will be breaching their obligations if they are not complying with the changes.
The four primary changes that will take place includes:
- increasing the percentage of superannuation to be paid;
- allowing employees to retain the same super account across jobs;
- requiring fund administrators to provide more information on investment decisions;
- will further introduce a government website which ranks funds based on performance.
Employee’s super entitlement set to increase
The SG rate is scheduled to increase from 9.5% to 10% on 1 July 2021, with a final decision to be released in the May 2021 budget.
The SG rate refers to the percentage of the employee’s wage that an employer must contribute to their super account. Of course, this amount can be higher, but any percentage below this rate from 1 July 2021 will be in contravention of the employer’s obligations.
Super will follow employees from job to job
From 1 July 2021, workers automatically retain their super fund when changing jobs.
Employees will have to follow certain steps when hiring a new employee:
- When hiring a new employee, the employer must find out from the ATO if their new employee already has a super fund. Employers must make payments into their existing account. However, a new employee may can inform their employer of their preferred fund using a standard choice form.
- If the new employee does not have a super account and does not inform the employer of a fund they have chosen, the employer can create an account on their behalf with their chosen fund.
Greater transparency for employees
Super fund administrators must provide information about their investment decisions and how they manage and spend money. This will occur prior to Annual Member’s Meetings. This allows employees to have greater knowledge of what type of fund their money is being deposited into.
Naming and shaming underperforming funds
Superannuation products will now face an annual performance test which will be made public on a government website. The website will rank super products by fees and investment returns and show employees where their super account sits in terms of performance.
Key Points for Employers:
- Changes to Superannuation under the 2020-2021 federal budget will commence from 1 July 2021.
- While not yet confirmed, the super guarantee may increase, meaning employers will be required to contribute a greater percentage of an employee’s wage to their super account.**
- Employers must be aware that employees will have a greater say in what fund they are in and will automatically carry over their previous fund.
- Employers need to ensure that they contact the ATO once they have hired a new employee to find out what fund they are under.
- Employers can only place employees into a default fund when an employee has no pre-existing fund and does not notify the employer of their preferred fund.
- By July 2022 all funds will be performance tested and ranked publicly on a government website. All employees will be able to view this information and can then choose to alter their fund.
*These changes were original set to increase to 10% in July 2015, however it was legislated to slow the gradual increases in the rate, delaying the increase to this amount by 7 years until July 2021.
**Although the rate is legislated to increase to 10% from 1 July 2021, in the wake of the COVID-19 crisis, there is substantial petitioning occurring within the Morrison Government to delay this increase again.
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