The 2020/21 budget has unveiled sweeping changes across the superannuation industry, with the aim of increasing the performance and value of superannuation accounts for all Australians. The Treasury Laws Amendment (Your Future, Your Super) Act 2021 targets systemic failings of the super system in a number of distinct ways, including:
- Providing a tool to compare super funds.
- Ensuring trustees of superannuation funds act in their members’ best interest.
- A publicly available assessment of underperforming superannuation funds.
By far the most significant change, however, was the introduction of ‘stapled super funds’, where companies will need to ensure their employees choose their super fund, or look up their existing super account.
We’ve recently discussed the increase in the superannuation guarantee, which has now been raised to 10% – the biggest increase in the last 10 years. But in this article, we dive into the most frequently asked questions about stapled funds, including the steps employers need to implement, the risks of not being compliant, as well as what this means for your contractors.
What is superannuation stapling?
A stapled superannuation fund is essentially the default fund an employee wants their super paid into. This fund follows them around whenever they changes jobs.
For the purposes of this new legislation, when an employee has multiple superannuation accounts, a stapled fund is usually the one that’s been contributed most recently. If they are both active, the stapled fund will be the one with the biggest balance.
Previously, employers would often open new superannuation accounts every time a worker started a new job. This would continually erode their super through fees. According to the Australian Government, this has contributed to Australians losing $30 billion every year in fees – more than the average person pays on their water or electricity bill.
How will superannuation stapling work?
According to the Australian Taxation Office (ATO), there are a number of steps employers will need to take to be compliant to the new legislation.
Step 1 – Give new employees a choice of super fund
Firstly, employers will need to ask employees what superannuation account they’d like to be paid into. In the first 28 days of a new starters’ employment, you’ll have to provide them with this superannuation standard choice form. This form allows them to give you the details of their super fund.
While employees are able to choose your default super fund if they don’t have their own, you are not able to provide them with recommendations or advice about which fund to choose. Unless of course you are licensed by the Australian Securities & Investments Commission (ASIC).
If the employee doesn’t choose a fund, then it’s time for step 2.
Step 2 – Contact the ATO for a stapled fund
When an employee doesn’t provide their superannuation fund, employers will need to contact the ATO to find details on their stapled fund.
This involves logging into the ATO online services and filling out your employee’s details (including tax file number, name, date of birth and address). Usually, the system will provide a stapled fund within a few minutes of searching.
If a stapled fund isn’t accepting contributions, the ATO advises calling 13 10 20, where they’ll let you know which fund to contribute to.
If you need to request the stapled fund details of 100 or more employees at once, the ATO will also offer a bulk request option. This service will go live on the 1st of November.
Step 3 – Pay the employee their super
As per usual, employers will need to pay the employee’s super into their nominated super fund (or stapled fund if they don’t nominate a fund).
When do these new rules kick in?
Super stapling commences from 1st November 2021 for all new employees. At this point, employers will need to go to the ATO for a worker’s stapled fund if they don’t elect one themselves.
What are the penalties?
Depending on the infraction, failing in your obligations around superannuation can open you up to a number of penalties:
- Not paying the super guarantee to the employee – In addition to having to pay the super, you’ll be liable for a maximum of 200% of the superannuation guarantee.
- Not providing employees with a choice of super fund, or paying the contribution to the wrong fund – Employers will need to pay 25% of affected super contribution, up to $500 per worker.
- Not keeping accurate records – The maximum fine for this is $6,660, plus potentially an administrative fine of $4,440.
- Not providing the employees tax file number – If you fail to provide the TFN in the required time, you may be charged $2,220.
What does this mean for contractors?
If you pay contractors for their labour, they’re most likely entitled to superannuation contributions. By paying contractors for their labour, that means the payment isn’t dependent on achieving a milestone or result, and the contractor isn’t subcontracting their work.
Superannuation guarantee payments do not include overtime, GST or payments for equipment.
The new steps for paying super into their stapled fund are exactly the same as full-time employees.
What are contingent workforce payroll organisations doing?
For companies with significant volumes of contractors, determining each workers stapled superannuation fund represents a significant administrative burden.
CXC onboards, manages and payrolls over 10,000 contingent workers per year. On behalf of employers, we manage all statutory payments, such as payroll tax and superannuation. Contractors outsourced to CXC become CXC’s responsibility, as does the responsibility to ensure all taxation and superannuation obligations are met and remitted correctly.
We have implemented processes to manage the stapled fund obligations in advance of the November deadline. We ensure that contingent workers are provided with a complete view of their superannuation, as well as the opportunity to automatically find past superannuation accounts and consolidate these during their onboarding process.
As one of the world’s leading providers of contingent worker management solutions, CXC is well positioned to optimise all elements of your contingent workforce engagement. With operations in more than 50 countries across five continents and decades of experience, we can assist with every aspect of your engagement.
If you would like to find out more about how we can help please contact us here.