Important change to employer super obligations

An important new requirement took effect from 1st November 2021.  Employers now need to complete an extra step in respect of super when taking on a new employee.

Back in 2005, the ATO introduced Choice of Super Fund rules.  This was a positive change as it ensured employees had a choice as to where their super would be contributed to.  This initiative limited employees having multiple accounts and therefore reduced extra costs and the opportunity for super to be lost.  And arguably more importantly, it also ensured employees did not lose life insurance under super when changing jobs.

Where an employee did not exercise their choice then the super had to be made to a default fund.  A default fund had to offer a minimum $50,000 in life insurance (hardly enough but better than nothing).  The default fund was also specified in an award (hence the rise of the industry funds).

An improvement has been made to the choice system in light of technological advancements and the number of employees with multiple super accounts as a result of their not exercising choice.

So from 1st November, a system has been put in place to staple a super account to an employee.  This means that the default fund choice will be replaced by employers having to contribute to a stapled super fund where no choice is exercised.  It only applies to employees employed on or after 1st November 2021 (with one exception below).

How do you find an employees’ stapled super fund?

If a new employee has not exercised choice within 28 days of starting employment, then the employer must log on ATO online services and access the stapled super fund service.  Apparently the stapled fund(s) will be listed on screen within minutes of completing a request.

We are not yet clear as to what employers without access to a computer or ATO online services are supposed to do (other than ask employees to complete and return the choice form within 28 days).

What if you contribute to a non-stapled super fund?

If an employer contributes into the default fund without checking for a stapled super fund, then that contribution will be subject to super guarantee charge.  In other words, the contribution is disregarded AND another contribution has to be made (which is non-deductible and can easily be two to three times more costly).

Other words of warning

  • Employers only have two months to contribute into a super fund after an employee has exercised their choice.
  • If you received an employees choice before 1st November where they nominated the default fund but no contributions were made before 1st November, contributions must be made under the new stapled super fund requirements.

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