Australian employers may have to take an extra step when setting up superannuation for new employees.
The Australian Tax Office (ATO) has introduced a new rule that aims to reduce the many millions of dollars in fees that Aussies pay to super funds, and also make the super process much more efficient.
In the past, if a super fund wasn’t nominated by a new employee, employers opened up a new super fund on the employee’s behalf. Now (as of 1 November 2021) employees will have a ‘stapled’ super fund, which basically means they stay with their super fund even if they change jobs.
This has created some important responsibilities for employers.
Super stapling explained
Super stapling was introduced to remove the unnecessary fees that came from individuals having super fund accounts opened for them whenever they changed jobs. More funds means more fees, and more administration, and at the end of the day it has a big impact as employees approach retirement and super savings become critical.
By ‘stapling’ a super fund to a person, people can change jobs but keep the same fund. Not only does this new law significantly reduce fees but increases the transparency between members and superannuation companies.
While the new legislation minimises the effort on the part of the employee, there may be extra steps for employers.
– Employers will need to contribute to the employee’s chosen fund if new employees have nominated it. In this scenario, the employee proposing the fund must give written notice to the employer.
– If the employee doesn’t provide the details of their super fund, employers may need to contact the ATO to find out if new hires have a stapled fund. Employers will have to pay into an employee’s stapled fund if they have one.
– Companies can appoint a business-nominated super fund if new hires don’t have a chosen super or stapled fund. They will need to complete a Choice Form at the start of employment.
The onus is on employers to check they are paying into the correct fund. Once an employee tells you their choice fund, you have two months to start contributing.
Failing to pay into the correct fund could result in payments not being counted against Superannuation Guarantee (SG) obligations. To meet those requirements, employers may even need to make another contribution.
To avoid confusion and potential penalties, it’s best for employers to provide all new hires with a superannuation standard choice form. This form will provide all the necessary information for employers.
ATO’s online system
The ATO has built an online stapling service to assist employers in checking employees’ super status (find out more here). Information can be processed within minutes, and the employee will be informed.
Bulk stapled super requests can be made for over 100 employees.
Are you compliant?
Although the ATO understands this new change will take some getting used to, there may still be penalties for organisations that are not compliant.
It’s best to request stapled super fund details for employees as soon as possible if they have not shared any information about their choice of fund.
An experienced accountant can make sure you’re compliant and make stapled super requests on your behalf.
To talk about your needs, contact us today.
The information contained on this article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.
Taxation, legal and other matters referred to on this website are of a general nature only and are based on Nitschke Nancarrow’s interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.
Nitschke Nancarrow specialises in accounting, tax and financial advice for superannuation. Contact us now for a no obligations discussion about your needs.Tags: Stapled Super Fund, Super Fund, Superannuation